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:
Preliminary proxy statement
x Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Citizens Bancshares Corporation
(Name of Registrant as Specified in Its Charter)
Citizens Bancshares Corporation
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
$125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
$500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
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:
CITIZENS BANCSHARES CORPORATION
175 John Wesley Dobbs Avenue, N.E.
Atlanta, Georgia 30303
(404) 659-5959
NOTICE OF THE ANNUAL MEETING TO
BE HELD MAY 26, 1999
To the Shareholders of CITIZENS BANCSHARES CORPORATION:
Notice is hereby given that the Annual Shareholders' Meeting
of Citizens Bancshares Corporation will be held on Wednesday, May
26, 1999, at 11:00 a.m., at the Atlanta Life Insurance Company,
Herndon Plaza, 100 Auburn Avenue, N.E., Atlanta, Georgia, for the
following purposes:
(1) To elect six (6) directors (to serve until the
next annual meeting and until their successors are
elected and qualified).
(2) To approve an amendment to the Articles of
Incorporation of the Company which would authorize
the issuance of non-voting common stock.
(3) To approve the Citizens Bancshares Corporation
Employee Stock Purchase Plan.
(4) To approve the Citizens Bancshares Corporation
1999 Incentive Stock Option Plan.
(5) To transact such other business as may properly
come before the meeting or any adjournments
thereof.
The Board of Directors has fixed the close of business on
April 15, 1999 as the record date for the determination of
shareholders entitled to notice of and to vote at the meeting.
All shareholders are requested to mark, date, sign and
return the enclosed form of proxy as soon as possible. If you
attend the meeting and wish to vote your shares in person, you
may do so at any time before the proxy is exercised.
By Order of the Board of Directors,
James E. Young
President and Chief Executive Officer
May 7, 1999
CITIZENS BANCSHARES CORPORATION
175 John Wesley Dobbs Avenue, N.E.
Atlanta, Georgia 30303
(404) 659-5959
May 7, 1999
To the Shareholders of CITIZENS BANCSHARES CORPORATION:
You are cordially invited to attend the Annual Shareholders'
Meeting of Citizens Bancshares Corporation (the "Company") to be
held on Wednesday, May 26, 1999. Official Notice of the meeting,
the Proxy Statement of management of the Company and the
Company's 1998 Annual Report accompany this letter.
The principal purposes of the meeting are to elect directors
of the Company for the coming year, approve the Citizens
Bancshares Corporation Employee Stock Purchase Plan and the
Citizens Bancshares Corporation 1999 Incentive Stock Option Plan,
and approve an amendment to the Articles of Incorporation of the
Company which will authorize the issuance of non-voting common
stock. We will also review the operations and recent developments
of the Company and the Bank for the past year.
Whether or not you plan to attend the meeting, please mark,
date and sign the enclosed form of proxy, and return it to the
Company in the envelope provided as soon as possible so that your
shares can be voted at the Annual Meeting.
Very truly yours,
James E. Young
President and Chief Executive Officer
PROXY STATEMENT
OF
CITIZENS BANCSHARES CORPORATION
for the Annual Meeting to be Held
May 26, 1999
___________________________________
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of the Company
for use at the Annual Shareholders' Meeting and at any
adjournments thereof. The Shareholders' Meeting will be held on
Wednesday, May 26, 1999 at 11:00 a.m., at the Atlanta Life
Insurance Company, Herndon Plaza, 100 Auburn Avenue, N.E.,
Atlanta, Georgia. The purpose of the Annual Shareholders' Meeting
of the Company is to elect six (6) directors for a one-year term
until the next annual meeting, to amend the Articles of
Incorporation to authorize the issuance of non-voting common
stock, and to approve the Citizens Bancshares Corporation
Employee Stock Purchase Plan and the Citizens Bancshares
Corporation 1999 Incentive Stock Option Plan.
The accompanying form of proxy is for use at the Annual
Shareholders' Meeting of the Company. A shareholder may use this
proxy if he or she is unable to attend the meeting in person or
wishes to have his or her shares voted by proxy even if the
shareholder does attend the meeting. Shareholders who sign
proxies have the right to revoke them at any time before they are
voted either by written notice of revocation which is received at
the Company's Main Office before the meeting or by the Secretary
at the meeting or by attending the meeting and voting in person.
All shares represented by valid proxies received pursuant to this
solicitation and not revoked before they are exercised will be
voted as directed, and where no direction is given, the shares
represented by such proxies will be voted for the election of
directors listed thereon. The Board of Directors of the Company
is not aware of any other matters which may be presented for
action at the meeting, but if other matters do properly come
before the meeting, it is intended that shares represented by
proxies will be voted by the persons named in the proxies in
accordance with their best judgment.
Solicitation of proxies may be made in person or by mail,
telephone or facsimile by directors, officers and regular
employees of the Company or Citizens Trust Bank (the "Bank") who
will not be specially compensated for such solicitations.
Brokerage houses, nominees, fiduciaries and other custodians will
be requested to forward solicitation materials to beneficial
owners and to secure their voting instructions, if necessary, and
will be reimbursed for their expenses incurred in sending proxy
materials to beneficial owners. The Company will bear the cost
associated with solicitation of proxies and other expenses
associated with the Shareholders' Meeting.
Record Date and Voting Rights
Each shareholder of record of the Company at the close of
business on April 15, 1999 (the "Record Date") is entitled to
notice of and to vote at the Shareholders' Meeting. As of the
close of business on the Record Date, the Company had 5,000,000
shares of common stock ("Common Stock"), $1.00 par value,
authorized, of which 2,164,065 shares were issued and outstanding
and held of record by 1,343 shareholders. Each such share is
entitled to one vote on matters to be presented at the meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
The Board proposes that the current slate of directors be
reelected as directors of the Company to serve an additional one-
year term and until their successors are duly elected and
qualified. If any of these nominees should become unavailable to
serve as a director (which is not now anticipated), then the
persons named as proxies reserve full discretion to vote for any
other person or persons as may be nominated. The affirmative vote
of a majority of the shares voted is required for the election of
directors.
The table below sets forth for each director nominee (a) the
person's name, (b) his or her age at April 15, 1999, (c) the year
he or she was first elected as a director, and (d) his or her
position with the Company other than as a director and his or her
other business experience for the past five years.
Director Nominees
To Serve a Term of One Year Until 2000
Year
First Position with the Company;
Name Age Elected Business Experience
Herman J. Russell 68 1972 Chairman of the Board of the
Company; Chairman of the
Board of H.J. Russell & Co.
(construction, real estate
and wholesale building
supplies distributor )
Gregory T. 50 1998 Vice Chairman of the Board of
Baranco 1/ the Company; President,
Baranco Pontiac-GMC Truck,
Inc. (automotive dealer);
Chairman of the Board of
Atlanta Life Insurance
Company; previously Chairman
of the Board of First
Southern Bancshares, Inc. and
First Southern Bank
Thomas E. Boland 64 1995 Special Counsel to the
President of Mercer
University; previously
Chairman of the Board of
Wachovia Bank of Georgia
Bernard H. 39 1998 President, Bronner Brothers ,
Bronner 1/ Inc. (hair care products);
President, Upscale Magazine
Johnnie L. Clark 67 1982 Certified Public
Accountant/Consultant;
Chairman, Board of Trustees
of Southwest Hospital and
Medical Center; previously
President and Chief Executive
Officer of the Company from
July 1997 to February 1998
James E. Young 2/ 50 1998 President and Chief Executive
Officer of the Company;
previously President and
Chief Executive Officer of
First Southern Bancshares,
Inc. and First Southern Bank
__________________
1/ Has served as a director of First Southern Bancshares, Inc.
(which merged with the Company on January 30, 1998) and First
Southern Bank since 1989.
2/ Has served as a director of First Southern Bancshares, Inc.
(which merged with the Company on January 30, 1998) and First
Southern Bank since 1993.
Meetings of Committees and the Board of Directors
During the year ended December 31, 1998, the Board of
Directors of the Company held three meetings. Every director
attended all of the Board meetings, except Bernard Bronner, who
attended one of the three meetings. In addition, the Board of
Directors of the Bank held twelve meetings in 1998.
The Board of Directors of the Company does not have standing
Audit, Compensation or Nominating Committees.
While the Board of Directors of the Company does not have a
standing Nominating Committee nor a formal procedure for
individual shareholders to submit recommendations of persons to
be considered as directors of the Company, the Board will
consider any such recommendation if delivered in writing to
James E. Young, Citizens Bancshares Corporation, 175 John Wesley
Dobbs Avenue, N.E., Atlanta, Georgia 30303.
Principal Officers
The table set forth below shows for each principal officer
of the Company (a) the person's name, (b) his age at April 15,
1999, (c) the year he was first elected as an officer of the
Company, and (d) his present position with the Company and the
Bank and other business experience for the past five years, if he
has been employed by the Company or the Bank for less than five
years.
Year
First Position with the Company;
Name Age Elected Business Experience
James E. Young 50 1998 President and Chief
Executive Officer of the
Company and the Bank;
previously President and
Chief Executive Officer of
First Southern Bancshares,
Inc. and First Southern
Bank (1993-1998)
Willard C. Lewis 38 1998 Senior Executive Vice
President and Chief
Operating Officer of the
Company and Bank;
previously Executive Vice
President and Chief
Operating Officer of First
Southern Bancshares, Inc.
and First Southern Bank
(1991-1998)
Samuel J. Cox 41 1998 Senior Vice President and
Chief Financial Officer of
the Bank and Assistant
Treasurer of the Company;
previously Senior Vice
President and Controller of
First Southern Bank (1996-
1998); Manager of Audit and
Computer Consulting, Banks,
Finley, White & Co. (1993-
1995)
EXECUTIVE COMPENSATION
The following table sets forth certain summary information
concerning the compensation paid to James E. Young, the President
and Chief Executive Officer of the Company and the Bank, and
Willard C. Lewis, the Senior Executive Vice President and Chief
Operating Officer of the Company and the Bank.
Cash Compensation Table
Annual
Compensation 1/ All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)
James E. Young, President and 1998 $144,589 $7,500 $1,965 1/
Chief Executive Officer
Willard C. Lewis, 1998 $102,535 $8,226 $429 2/
Senior Executive Vice
President and Chief
Operating Officer
__________________
1/Information with respect to certain perquisites and other
personal benefits has been omitted because the aggregate value of
such items does not meet the minimum amount required for
disclosure under regulations adopted by the Securities and
Exchange Commission ("SEC"). The Company has not awarded any
restricted stock or long-term incentives. Accordingly, columns
relating to such awards have been omitted.
2/Consists of cash payments for life insurance policy.
After the merger of First Southern Bancshares, Inc. with and
into the Company, which was effective on January 30, 1998,
James E. Young became President and Chief Executive Officer of
the Company. Mr. Young has entered into an employment agreement
with the Company which provides for a salary of $150,000 and
incentive compensation contingent upon certain performance goals
being met. The agreement also provides for an option to purchase
17,500 shares of Common Stock to be vested over a five-year term
at an exercise price of $9.88 per share.
The following table contains, with respect to the person[s]
named in the Summary Compensation Table, information concerning
the number of options to purchase Common Stock, the number
currently exercisable, and the value of the options.
Fiscal Year End Option Values
Value of Unexercised
Number of Unexercised In-the-Money
Options at 12/31/98 Options at 12/31/98
Name (#): Exercisable/Unexercisable ($) Exercisable/Unexercisable 1/
James E. Young 7,540/17,500 $4,675/$0
__________________
1/Calculated by subtracting the exercise price ($6.88 per share
for the 7,540 exercisable options and $9.88 per share for the
17,500 unexercisable options) from $7.50 per share.
Director Fees
The directors of the Company receive fees in the amount of
$300.00 per meeting for their service as directors of the
Company.
CERTAIN TRANSACTIONS
The Company's directors and principal officers, their
immediate family members and certain companies and other entities
associated with them, have been customers of and have had banking
transactions with the Bank and are expected to continue such
relationships in the future. In the opinion of management, the
extensions of credit made by the Bank to such individuals,
companies and entities (a) were made in the ordinary course of
business, (b) were made on substantially the same terms,
including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and
(c) did not involve more than a normal risk of collectibility or
present other unfavorable features.
BENEFICIAL OWNERSHIP OF COMMON STOCK
Principal Holders of Common Stock
The following table sets forth the persons who beneficially
owned, at March 1, 1999, more than five percent of outstanding
shares of Common Stock to the best information and knowledge of
the Company. Unless otherwise indicated, each person is the
record owner of and has sole voting and investment powers over
his shares.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership 1/ of Class
Herman J. Russell 580,488 26.82%
504 Fair Street, S.W.
Atlanta, Georgia 30313
__________________
1/The information shown above is based upon information furnished
to the Company by the named persons Information relating to
beneficial ownership of Common Stock is based upon "beneficial
ownership" concepts set forth in rules promulgated under the
Securities Act of 1934, as amended. Under such rules a person is
deemed to be a "beneficial owner" of a security if that person
has or shares "voting power," which includes the power to dispose
or to direct the voting of such security, or "investment power,"
which includes the power to dispose or to direct the disposition
of such security. A person is also deemed to be a beneficial
owner of any security of which that person has the right to
acquire beneficial ownership within 60 days. Under the rules,
more than one person may be deemed to be a beneficial owner of
the same securities. The shares of Common Stock issuable upon
exercise of the vested portion of any outstanding options held by
the indicated named persons are assumed to be outstanding for the
purpose of determining the percentage of shares beneficially
owned by those persons.
Common Stock Owned by Management
The following table sets forth the number and percentage
ownership of shares of Common Stock beneficially owned by each
director of the Company and by all directors and principal
officers as a group, at March 1, 1999. Unless otherwise
indicated, each person is the record owner of and has sole voting
and investment powers over his or her shares.
Number of Percent
Name of Director Shares Of Class
Beneficially
Owned 1/
Herman J. Russell 580,488 26.82%
504 Fair Street, S.W.
Atlanta, Georgia 30313
Gregory T. Baranco 73,257 2/ 3.38%
4070 Sandy Lake Drive
Lithonia, Georgia 30038
Thomas E. Boland 500 *
3001 Mercer University
Drive
Atlanta, Georgia 30341
Bernard H. Bronner 8,594 3/ *
594 Fielding Lane
Atlanta, Georgia 30311
Johnnie L. Clark 16,103 *
2794 Chaucer Drive, S.W.
Atlanta, Georgia 30311
James E. Young 785 *
647 Master Drive
Stone Mountain, Georgia
30032
All directors and 681,834 31.50%
principal
officers as a group
(8 persons)
__________________
*Represents less than 1%.
1/ The information shown above is based upon information
furnished to the Company by the named persons. Information
relating to beneficial ownership of Common Stock is based upon
"beneficial ownership" concepts set forth in rules promulgated
under the Securities Act of 1934, as amended. Under such rules a
person is deemed to be a "beneficial owner" of a security if that
person has or shares "voting power," which includes the power to
dispose or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the
disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the
right to acquire beneficial ownership within 60 days. Under the
rules, more than one person may be deemed to be a beneficial
owner of the same securities. The shares of Common Stock issuable
upon exercise of the vested portion of any outstanding options
held by the indicated named persons are assumed to be outstanding
for the purpose of determining the percentage of shares
beneficially owned by those persons.
2/ Consists of (a) 13,722 shares owned of record by Mr. Baranco,
(b) 55,494 shares owned jointly with his spouse, and (c) 4,041
shares held in Mr. Baranco's self-directed IRA.
3/ Consists of (a) 8,067 shares owned of record by Mr. Bronner
and (b) 527 shares owned by Bronner Brothers, Inc., a company
controlled by Mr. Bronner.
Compliance with Section 16(a) of the Exchange Act
To the Company's knowledge, based solely upon a review of
copies of Reports of Beneficial Ownership and Changes in
Beneficial Ownership furnished to it and representations that no
other reports were required, its directors, executive officers,
and greater than ten percent shareholders have complied with
applicable Section 16(a) filing requirements.
PROPOSAL 2 - AMENDMENT OF ARTICLES OF INCORPORATION
The Board of Directors has determined that it is in the best
interests of the Company to enter into a Stock Purchase Agreement
with the Federal National Mortgage Association ("FNMA"), whereby
FNMA would purchase up to 500,000 shares of non-voting common
stock in the Company. The purchase of non-voting common stock
would provide for additional capital for the Company without
causing any change in control.
Therefore, the Board of Directors recommends that the
Articles of Incorporation of the Company be amended to authorize
the issuance of non-voting common stock and, therefore, proposes
to amend Article 4 to read as follows: "The Corporation shall
have the authority to issue Ten Million (10,000,000) shares
consisting of (i) 5,000,000 shares of Common Stock (the "Common
Stock"), $1.00 par value, and (ii) 5,000,000 shares of non-voting
common stock (the "Non-Voting Common Stock"), $1.00 par value.
The shares of Non-Voting Common Stock will, for all purposes
except voting, have the same preferences, limitations and
relative rights as Common Stock."
The Board of Directors recommends that shareholders vote FOR
approval of the proposed amendment to Article 4.
PROPOSAL 3 - APPROVAL OF THE CITIZENS BANCSHARES
CORPORATION EMPLOYEE STOCK PURCHASE PLAN
Introduction
On January 22, 1999, the Board of Directors adopted the
Citizens Bancshares Corporation Employee Stock Purchase Plan (the
"Stock Purchase Plan") and will be effective as soon as practical
after approval by the shareholders, the full text of which is set
forth in Appendix A to this Proxy Statement. Under the terms of
the Stock Purchase Plan, eligible employees of the Company and
designated subsidiaries will be granted options to purchase
shares of Common Stock of the Company. Shareholder approval of
the Stock Purchase Plan is required to qualify the Stock Purchase
Plan for the tax treatment under Section 423 of the Internal
Revenue Code.
The Company has reserved a total of 324,610 shares of Common
Stock for issuance under the Stock Purchase Plan.
The purpose of the Stock Purchase Plan is to enable eligible
employees of the Company and designated subsidiaries to purchase
Common Stock in a convenient manner through payroll deductions
and thereby allow such employees to share in the success of the
Company and to encourage them to remain in the service of the
Company or its subsidiaries. Accordingly, the Board of Directors
has approved and recommends a vote in favor of the Stock Purchase
Plan.
The following description of the Stock Purchase Plan is
qualified in its entirety by reference to the applicable
provisions of the plan document.
Terms of the Stock Purchase Plan
Administration. The Stock Purchase Plan is administered by
the Board of Directors, unless the Board of Directors appoints
two or more of its members to serve upon a committee responsible
for administering the plan (the "Administrative Committee").
Currently, the members of the Administrative Committee are Herman
J. Russell, Gregory T. Baranco, Johnnie L. Clark, Thomas E.
Boland, and Bernard H. Bronner. The Board of Directors may from
time to time remove members from or add members to the
Administrative Committee or fill vacancies.
Term. The Stock Purchase Plan will be maintained for an
indefinite period.
Eligibility. Any full-time employee of the Company or of
any subsidiary of the Company (as designated from time to time by
the Board of Directors) may elect to purchase Common Stock
through participation in the Stock Purchase Plan. As of April 15,
1999, approximately 160 employees would have been eligible to
purchase Common Stock under the Stock Purchase Plan had it then
been in effect.
Contributions. Each eligible employee may elect to
participate in the Stock Purchase Plan through payroll deductions
by tendering a written election authorizing the deduction of a
percentage of his or pay from 1% up to 15% to be applied to the
purchase of Common Stock. Payroll deductions will commence with
paychecks issued during each offering period, provided the
election is delivered to the Company at least 15 days prior to
the first day of that offering period. A participant may
increase or decrease payroll deduction amounts only at the
beginning of an offering period.
If a participant withdraws from the Stock Purchase Plan, he
or she may resume participation as of the first day of a future
offering period if a timely election is delivered to the Company.
Limitations upon Participation. Owners of 5 percent or more
of the stock of the Company or any subsidiary and non-residents
of the State of Georgia are not permitted to participate in the
Stock Purchase Plan. In addition, no participant may purchase
more than 2,000 shares of Common Stock during any single offering
period or at a rate which exceeds $25,000 of the fair market
value of Common Stock in any calendar year.
Purchases of Common Stock. As soon as practicable after the
close of each offering period, the Company will apply the total
payroll deductions received during the offering period to the
purchase of Common Stock at a purchase price equal to the lower
of 85% of the Common Stock's fair market value as of the first
day of the offering period or 85% of the fair market value of the
Common Stock as of the last day of the offering period. Any
payroll deductions remaining after the purchase of the maximum
number of full shares which can be purchased will be applied to
the purchase of shares in the immediately succeeding offering
period, unless the participant timely effects an earlier
withdrawal from the Stock Purchase Plan. Purchases may be made
in the open market, from treasury shares or with newly issued
shares. No interest is payable by the Company on accumulated
payroll deductions.
Stock Certificates. A stock certificate representing the
number of shares purchased on behalf of a participant will be
delivered to the participant as soon as practicable after the end
of each offering period.
Dividends. No dividend or voting rights will exist with
respect to shares of Common Stock purchased under the Stock
Purchase Plan until the date the stock certificate is issued.
Transfer Restrictions. The purchase rights under the Stock
Purchase Plan are not transferable by a participant. In
addition, shares of Common Stock purchased under the plan are not
transferable for a period of 6 months from the date of purchase.
Cessation of Participation. A participant may choose to
withdraw from the Stock Purchase Plan and receive a refund of
payroll deductions if the election to withdraw is delivered to
the Company at least 15 days prior to the end of the applicable
offering period. Offering periods generally extend for a period
of six months.
Expenses. All costs of maintaining records and executing
transfers of Common Stock will be borne by the Company.
Amendment or Discontinuance of the Stock Purchase Plan. The
Board of Directors may amend or discontinue the Stock Purchase
Plan at any time. No amendment will be effective without the
approval of the Company's shareholders where such approval is
deemed necessary under Section 423 of the Internal Revenue Code
or Rule 16b-3 under the Securities Exchange Act of 1934.
No amendment may deprive a participant of any shares of
Common Stock acquired on his or her behalf prior to the effective
date of the amendment.
Benefits to Named Executive Officers and Others
The Stock Purchase Plan has not been implemented as of the
date of this Proxy Statement.
Tax Consequences
The Company intends that the Stock Purchase Plan qualify as
an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code. The federal income tax consequences to
the participants and the Company are as follows.
Contributions withheld from a participant's regular
compensation through payroll deductions are taxable income to the
participant, and the participant's cash contributions to the
Stock Purchase Plan are deductible to the Company.
The required holding period for favorable tax treatment upon
disposition of Common Stock acquired under the Stock Purchase
Plan (the "Holding Period") is 18 months after the shares are
purchased. If a participant holds Common Stock for the required
Holding Period and then sell the shares, he or she will realize
ordinary income to the extent of the lesser of (1) the excess of
the fair market value of the Common Stock on the first day of the
offering period over the "purchase price" or (2) the excess of
the fair market value of the Common Stock at the time of the
disposition over the amount paid for the shares. For this
purpose the "purchase price" is equal to 85% of the fair market
value of the Common Stock as of the first day of an offering
period. Any further gain realized upon the sale will be
considered a long-term capital gain. If the sale price is less
than the purchase price, there will be no ordinary income and the
participant will have a long-term capital loss for the
difference.
When a participant sells Common Stock purchased under the
Stock Purchase Plan before the expiration of the required Holding
Period, he or she will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock
on the last day of the offering period over the price actually
paid for the Common Stock. Any gain realized in excess of that
amount will be taxed as a capital gain. If the sale price is
less than the amount paid, increased by the ordinary income which
must be recognized, then any such loss will be a capital loss.
If a participant dies while owning Common Stock acquired
under the Stock Purchase Plan, ordinary income must be reported
on the deceased participant's final income tax return. This
amount will be the lesser of (1) the excess of the fair market
value of the Common Stock as of the first day of the offering
period over the purchase price or (2) the excess of the fair
market value of the Common Stock at the time of the participant's
death over the price paid for the shares.
The foregoing discussion is only a general summary of the
federal income tax consequences of a purchase of Common Stock
under the Stock Purchase Plan and the subsequent disposition of
shares received pursuant to such purchases.
Shareholder Vote Required
The Board of Directors seeks shareholder approval because
such approval is required under the Internal Revenue Code as a
condition to favorable tax treatment for participants under the
Stock Purchase Plan.
Approval of the Stock Purchase Plan requires the affirmative
vote of the holders of at least a majority of the outstanding
shares of Common Stock of the Company present, or represented and
entitled to vote, at the Meeting.
The Board of Directors recommends a vote FOR
approval of the Stock Purchase Plan.
PROPOSAL 4 - APPROVAL OF THE CITIZENS BANCSHARES
CORPORATION 1999 STOCK INCENTIVE PLAN
Introduction
On January 22, 1999, the Board of Directors approved the
Citizens Bancshares Corporation 1999 Stock Incentive Plan (the
"Stock Incentive Plan"), the full text of which is set forth in
Appendix B to this Proxy Statement. The Stock Incentive Plan
provides the Company with the ability to grant options to key
employees, officers, directors and consultants of the Company and
its affiliates for the purpose of giving them a proprietary
interest in the Company and providing the Company with a
mechanism to attract and retain key personnel. Accordingly, the
Board of Directors has approved and recommends a vote in favor of
the Stock Incentive Plan.
The Board of Directors has reserved 324,610 shares of Common
Stock for issuance pursuant to awards that may be made under the
Stock Incentive Plan, subject to adjustment as provided in the
Stock Incentive Plan.
Applicable provisions of the Internal Revenue Code restrict
the Company's ability in the absence of shareholder approval to
grant incentive stock options under Section 422 of the Internal
Revenue Code and to claim deductions which may otherwise be
associated with the grant of nonqualified options under Section
162(m) of the Internal Revenue Code.
The following description of the Stock Incentive Plan is
qualified in its entirety by reference to the applicable
provisions of the plan document.
Terms of the Stock Incentive Plan
Administration. Awards under the Stock Incentive Plan will
be determined by a committee of the Board of Directors (the
"Committee"), the members of which are selected by the Board of
Directors. The Board of Directors will consider the advisability
of complying with the disinterested standards contained in both
Section 162(m) of the Internal Revenue Code and Rule 16(b)(3)
under the Securities Exchange Act of 1934 when appointing members
to the Committee. The Committee will have at least two members.
At the present time, the members of the Committee are Herman J.
Russell, Gregory T. Baranco, Johnnie L. Clark, Thomas E. Boland,
and Bernard H. Bronner.
The Committee will have the power to make all necessary
decisions regarding the proper administration of the Stock
Incentive Plan including, but not limited to, interpretation of
the provisions of the Stock Incentive Plan and whether to
prescribe, amend, or rescind the rules and regulations relating
to the Stock Incentive Plan. Additionally, the Committee will
have the authority to determine, in its discretion, which
officers, employees, directors and consultants who will receive
awards under the Stock Incentive Plan and the terms of the
options which are granted. The Committee's decisions relating to
the administration of the Stock Incentive Plan and the grant of
options will be final and binding.
Option Awards. The Stock Incentive Plan permits the
Committee to make awards of options to purchase shares of Common
Stock and certain cash awards to eligible persons. These
discretionary awards may be made on an individual basis or
pursuant to a program approved by the Committee for the benefit
of a group of eligible persons.
The number of shares of Common Stock as to which any option
is granted and to whom any option is granted will be determined
by the Committee, subject to the provisions of the Stock
Incentive Plan. However, no employee of the Company or any
affiliate may be granted, during any single fiscal year of the
Company, rights to shares of Common Stock under options which, in
the aggregate, exceed 100,000 shares of Common Stock.
Options issuable may be made exercisable or settled at such
prices and may be made forfeitable or terminable under such terms
as are established by the Committee, to the extent not otherwise
inconsistent with the terms of the Stock Incentive Plan. Options
generally are not transferable or assignable during a holder's
lifetime.
The Stock Incentive Plan provides for incentive stock
options and nonqualified stock options. The Committee will
determine whether an option is an incentive stock option or a
nonqualified stock option at the time the option is granted, and
the option will be evidenced by a stock option agreement.
Options may be made exercisable pursuant to such terms as are
established by the Committee, to the extent not otherwise
inconsistent with the terms of the Stock Incentive Plan.
The exercise price of an option shall be set forth in the
applicable stock option agreement. The exercise price of an
incentive stock option may not be less than the fair market value
of the Common Stock on the date of the grant (or less than 110%
of the fair market value if the participant owns more than 10% of
the Company's outstanding Common Stock). At the time the
incentive stock option is exercised, the Company will be entitled
to place a legend on the certificates representing the shares of
Common Stock purchased pursuant to the option to identify them as
shares of Common Stock purchased upon the exercise of an
incentive stock option. Nonqualified stock options generally may
be made exercisable at a price equal to, less than or more than
the fair market value of the Common Stock on the date that the
option is awarded, based upon an average fair market value of the
Common Stock at the time the option is awarded, or based upon any
other reasonable measure of fair market value. The exercise
price of a nonqualified stock option shall be no less than fair
market value if, at the time of the grant, the optionee is a
"covered employee" within the meaning of Section 162(m) of the
Internal Revenue Code. The Committee may permit an option
exercise price to be paid in cash or by the delivery of
previously-owned shares of Common Stock, or to be satisfied
through a cashless exercise executed through a broker or by
having a number of shares of Common Stock otherwise issuable at
the time of exercise withheld. Company or affiliate financing
may, in the discretion of the Committee, be offered to assist
participants with payment of the option exercise price.
A participant may be liable for federal, state or local tax
withholding obligations as a result of the exercise of a
nonqualified stock option. The tax withholding obligation may be
satisfied by payment in the form of cash or a certified check or,
if a participant elects with the permission of the Committee, by
a reduction in the number of shares to be received by the
participant upon exercise of the option.
The term of an option shall be specified in the applicable
stock option agreement. The term of an incentive stock option
may not exceed ten years from the date of grant; however, any
incentive stock option granted to a participant who owns more
than 10% of the Common Stock will not be exercisable after the
expiration of five (5) years after the date the option is
granted. Subject to any further limitations in a stock option
agreement, in the event of a participant's termination of
employment, the term of an incentive stock option shall expire,
terminate and become unexercisable no later than three months
after the date of such termination of employment; provided,
however, that if such termination of employment is due to death
or disability, one year will be substituted for the three-month
period.
Certain Cash Awards. The Committee may make cash awards
designed to cover tax obligations of participants that result
from the exercise of an option.
Termination of Options. The terms of a particular option
may provide that they terminate, among other reasons, upon the
holder's termination of employment or other status with respect
to the Company or any affiliate of the Company, upon a specified
date, upon the holder's death or disability, or upon the
occurrence of a change in control of the Company. Options may
include exercise, conversion or settlement rights to a holder's
estate or personal representative in the event of the holder's
death or disability. At the Committee's discretion, options that
are subject to termination may be cancelled, accelerated, paid or
continued, subject to the terms of the applicable stock option
agreement and to the provisions of the Stock Incentive Plan.
Certain Reorganizations. The number of shares of Common
Stock reserved for issuance in connection with the grant or
settlement of options or to which an option is subject, as the
case may be, and the exercise price of each option are subject to
adjustment in the event of any recapitalization of the Company or
similar transaction effected without the receipt of
consideration.
In the event of certain corporate reorganizations, options
may be substituted, cancelled, accelerated, cashed-out or
otherwise adjusted by the Committee, provided such adjustment is
not inconsistent with the terms of the Stock Incentive Plan or
any agreement reflecting the terms of an option.
Amendments or Termination. Although the Stock Incentive
Plan may be amended or terminated by the Board of Directors
without shareholder approval, the Board of Directors also may
condition any such amendment or termination upon shareholder
approval if shareholder approval is deemed necessary or
appropriate in consideration of tax, securities or other laws.
No such action by the Board of Directors may adversely affect the
rights of a holder of an option without the holder's consent.
The Stock Incentive Plan has an indefinite term, although
incentive stock options must be granted within ten years after
the adoption of the Stock Incentive Plan by the Board of
Directors.
Benefits to Named Executive Officers and Others
The Committee has not yet made any determination as to which
eligible participants will be granted options under the Stock
Incentive Plan.
Federal Income Tax Consequences
The following discussion outlines generally the federal
income tax consequences of participation in the Stock Incentive
Plan. Individual circumstances may vary and each participant
should rely on his or her own tax counsel for advice regarding
federal income tax treatment under the Stock Incentive Plan.
Incentive Stock Options. A participant who exercises an
incentive stock option will not be taxed at the time he or she
exercises his or her option or a portion thereof. Instead, the
participant will be taxed at the time he or she sells the shares
of Common Stock purchased pursuant to the incentive stock option.
The participant will be taxed on the difference between the price
he or she paid for the Common Stock and the amount for which he
or she sells the Common Stock. If the participant does not sell
the shares of Common Stock prior to two years from the date of
grant of the incentive stock option and one year from the date
the Common Stock is transferred to him or her, the gain will be
capital gain and the Company will not get a corresponding
deduction. If the participant sells the shares of Common Stock
at a gain prior to that time, the difference between the amount
the participant paid for the Common Stock and the lesser of fair
market value on the date of exercise or the amount for which the
stock is sold will be taxed as ordinary income. If the
participant sells the shares of Common Stock for less than the
amount he or she paid for the stock prior to the one- or two-year
period indicated, no amount will be taxed as ordinary income and
the loss will be taxed as a capital loss. Exercise of an
incentive stock option may subject a participant to, or increase
a participant's liability for, the alternative minimum tax.
Nonqualified Options. A participant will not recognize
income upon the grant of a nonqualified option or at any time
prior to the exercise of the option or a portion thereof. At the
time the participant exercises a nonqualified option or portion
thereof, he or she will recognize compensation taxable as
ordinary income in an amount equal to the excess of the fair
market value of the Common Stock on the date the option is
exercised over the price paid for the Common Stock, and the
Company will then be entitled to a corresponding deduction.
Depending upon the period shares of Common Stock are held
after exercise, the sale or other taxable disposition of shares
acquired through the exercise of a nonqualified option generally
will result in a short- or long-term capital gain or loss equal
to the difference between the amount realized on such disposition
and the fair market value of such shares when the nonqualified
option was exercised.
Special rules apply to a participant who exercises a
nonqualified option by paying the exercise price, in whole or in
part, by the transfer of shares of Common Stock to the Company.
Shareholder Vote Required
The Board of Directors seeks shareholder approval because
such approval is required under the Internal Revenue Code as a
condition to incentive stock option treatment and will maximize
the potential for deductions associated with any nonqualified
options granted under the Stock Incentive Plan.
Approval of the Stock Incentive Plan requires the
affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock of the Company present, or
represented and entitled to vote, at the Annual Meeting.
The Board of Directors recommends a vote FOR
approval of the Stock Incentive Plan.
ACCOUNTING MATTERS
Deloitte & Touche LLP, Atlanta, Georgia, certified public
accountants, has been appointed by the Board of Directors of the
Company to examine the financial statements of the Company as of
and for the year ended December 31, 1998. The Board of Directors
intends to continue the services of this firm for the year ending
December 31, 1999. A representative of Deloitte & Touche LLP is
expected to be present at the meeting to respond to any
appropriate questions and to make a statement if the
representative desires to do so.
SHAREHOLDER PROPOSALS
Any shareholder of the Company wishing to submit a proposal
for action at the next annual meeting of shareholders of the
Company, and desiring inclusion of the same in management's proxy
materials, must provide a written copy of the proposal to
management not later than March 15, 2000. Any such proposal must
comply in all respects with the rules and regulations of the
Securities and Exchange Commission.
AVAILABLE INFORMATION
A copy of the Company's Annual Report to Shareholders on
Form 10-KSB (the "Form 10-KSB") is available upon request (except
for the exhibits thereto) without charge. Shareholders may
request a copy of the Form 10-KSB by contacting Willard C. Lewis,
Citizens Bancshares Corporation, 175 John Wesley Dobbs Avenue,
N.E., Atlanta, Georgia 30303 (Telephone: (404) 659-5959).
APPENDIX A
CITIZENS BANCSHARES CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the Citizens
Bancshares Corporation Employee Stock Purchase Plan.
1. Purpose. The purpose of the Plan is to provide employees
of the Company and its Designated Subsidiaries with an
opportunity to purchase Common Stock of the Company. It is the
intention of the Company to have the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the
requirements of that Section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean Citizens Bancshares Corporation
Georgia corporation.
(e) "Compensation" shall mean all regular gross wages
exclusive of commissions, overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation;
except as the Company may otherwise determine from time to time
pursuant to rules uniformly applied.
(f) "Continuous Status as an Employee" shall mean the
absence of any interruption or termination of service as an
Employee. Continuous Status as an Employee shall not be
considered interrupted in the case of a leave of absence pursuant
to Company policy or where reemployment upon the expiration of
such leave is guaranteed by contract or statute.
(g) "Contributions" shall mean all amounts credited to the
account of a participant pursuant to the Plan.
(h) "Designated Subsidiaries" shall mean the Subsidiaries,
which have been designed by the Board from time to time in its
sole discretion as eligible to participate in the Plan.
(i) "Employee" shall mean any individual, including an
Officer, who is (i) a resident of the state of Georgia and (ii)
is customarily employed by the Company or any of its Designated
Subsidiaries for at least twenty (20) hours per week and more
than five (5) months in a calendar year by the Company or one of
its Designated Subsidiaries.
(j) "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.
(k) "Exercise Date" shall mean the last day of each
offering period of the Plan.
(l) "Offering Date" shall mean the first business day of
each Offering Period of the Plan.
(m) "Offering Period" shall mean a period of six
(6) months commencing on January 1 and July 1 of each
year, except for the first Offering Period as set forth
in Plan paragraph 4.
(n) "Officer" shall mean a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and
the rules and regulations promulgated thereunder.
(o) "Plan" shall mean the Citizens Bancshares Corporation
Employee Stock Purchase Plan.
(p) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company where each corporation other than the last corporation in
the unbroken chain owning stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the
other corporations in the chain, whether or not such corporation
now exists or is hereafter organized or acquired by the Company.
2. Eligibility.
(a) Any person who is an Employee for more than thirty (30)
days as of the Offering Date of a given Offering Period shall be
eligible to participate in such Offering Period under the Plan,
subject to the requirement of paragraph 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (or any
other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Subsidiary of
the Company, or (ii) if such options would permit his or her
rights to purchase stock under all employee stock purchase plans
(described in Section 423 of the Code) of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) of fair market value of such stock
(determined at the time such option is granted) for each calendar
year in which such option is outstanding at any time.
3. Offering Periods.
The Plan shall be implemented by a series of Offering
Periods of six (6) months duration, other than the first Offering
Period, with the Offering Period commencing on or about January 1
and July 1 of each year (or at such other time or times as may be
determined by the Board). Notwithstanding the foregoing, the
first Offering Period shall commence on or as soon as practicable
after May 27, 1999 and end on December 31, 1999, and thereafter
an Offering Period shall commence every six months in accordance
with the foregoing. The Plan shall continue until terminated in
accordance with paragraph 19 hereof. The Board shall have the
power to change the duration and/or the frequency of Offering
Periods with respect to future offerings without stockholder
approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to
be affected.
4. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing an enrollment form provided by the Company and
filing it with the Company at least fifteen (15) calendar days
prior to the applicable Offering Date, unless a later time for
filing the enrollment form is set by the Board for all eligible
Employees with respect to a given offering. The enrollment form
shall set forth the percentage of the participant's Compensation
(which shall be not less than 1% and not more than 15%) to be
paid as Contributions pursuant to the Plan.
(b) A participant may discontinue his or her participation in
the Plan as provided in paragraph 10.
(c) A participant may not alter the rate of Contributions
during an Offering Period.
2. Method of Payment of Contributions.
(a) All payroll deductions made by a participant shall be
credited to his or her account under the Plan. A participant may
not make any additional payments into such account.
(b) Payroll deductions shall commence on the first payday
following the Offering Date and shall end with the last payday on
or prior to the Exercise Date of the Offering Period to which the
enrollment form is applicable, unless sooner terminated by the
participant as provided in paragraph 10.
(c) Notwithstanding the foregoing, to the extent necessary
to comply with paragraph 3(b) herein, a participant's payroll
deductions may be decreased to 0% at such time during any
Offering Period which is scheduled to end during any calendar
year that the aggregate of all payroll deductions accumulated
with respect to such Offering Period and any other Offering
Period ending within the same calendar year is equal to $25,000.
Payroll deductions shall re-commence at the rate provided in such
participant's enrollment form at the beginning of the first
Offering Period which is scheduled to commence in the following
calendar year, unless terminated by the participant as provided
in paragraph 10.
3. Option Grant.
(a) On the Offering Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be
granted an option to purchase on the Exercise Date a number of
shares of Common Stock determined by dividing such participant's
Contributions accumulated prior to such Exercise Date and
retained in the participant's account as of the Exercise Date by
the lower of (i) eighty-five percent (85%) of the fair market
value of a share of Common Stock on the Offering Date; or (ii)
eighty-five (85%) of the fair market value of a share of Common
Stock on the Exercise Date; provided, however, that the maximum
number of shares a participant may purchase during each Offering
Period shall be 2,000 shares (subject to adjustment in accordance
with paragraph 18); and provided further, however, that such
purchase shall be subject to the limitations set forth in
paragraphs 3(b) and 18. The fair market value of a share of
Common Stock shall be determined as provided in paragraph 7(c).
(b) The option price per share of the shares offered in a given
Offering Period shall be the lower of: (i) 85% of the fair market
value of a share of the Common Stock of the Company on the
Offering Date; or (ii) 85% of the fair market value of a share of
the Common Stock of the Company on the Exercise Date.
(c) For purposes of this paragraph, the fair market value
of a share of Common Stock as of each Exercise Date shall be
determined, as of the most immediately preceding business day
with respect to which the information required in the following
clauses is available, as follows: (i) if the Common Stock is
traded on a national securities exchange, the closing sale price
on that date; (ii) if the Common Stock is not traded on any such
exchange, the closing sale price as reported by the National
Association of Securities Dealers, Inc. Automated Quotation
Systems ("NASDAQ"); (iii) if no such closing sale price
information is available on the national securities exchange or
NASDAQ, the average of the closing bid and asked prices as
reported by the national securities exchange or NASDAQ within a
reasonable period prior to such date; or (iv) if there are no
such closing bid and asked prices within a reasonable period, the
determination of fair market value shall be determined by the
Company taking into account material facts and circumstances
pertinent to such determination, as determined by the Company in
its sole discretion.
8. Exercise of Option. Unless a participant withdraws from
the Plan as provided in paragraph 10, his or her option for the
purchase of shares will be exercised automatically on the
Exercise Date of the Offering Period, and the maximum number of
full shares subject to the option will be purchased at the
applicable option price with the accumulated Contributions in his
or her account. The shares purchased upon exercise of an option
hereunder shall be deemed to be transferred to the participant on
the Exercise Date. During his or her lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or
her.
9. Delivery. As promptly as practicable after the Exercise
Date of each Offering Period, the Company shall arrange the
delivery to each participant, as appropriate, a certificate
representing the shares purchased upon exercise of his or her
option. Any cash remaining to the credit of a participant's
account under the Plan after a purchase by him or her of shares
at the termination of each Offering Period which is insufficient
to purchase a full share of Common Stock shall be carried over to
the next Offering Period if the Employee continues to participate
in the Plan, or if the Employee does not continue to participate,
shall be returned to said participant.
10. Voluntary Withdrawal: Termination of Employment.
(a) A participant may withdraw all but not less than all
the Contributions credited to his or her account under the Plan
prior to the Exercise Date of the Offering Period by giving at
least fifteen (15) days' prior written notice to the Company.
All of the participant's Contributions credited to his or her
account will be paid to him or her promptly after receipt of his
or her notice of withdrawal and his or her option for the current
period will be automatically terminated, and no further
Contributions for the purchase of shares will be made during the
Offering Period.
(b) Upon termination of the participant's Continuous Status
as an Employee prior to the Exercise Date of an Offering Period
for any reason, including retirement or death, the Contributions
credited to his or her account will be returned to him or her or,
in the case of his or her death, to the person or persons
entitled thereto under paragraph 14, and his or her option will
be automatically terminated.
(c) In the event an Employee fails to remain in Continuous
Status as an Employee of the Company for at least twenty (20)
hours per week during the Offering Period in which the employee
is a participant or otherwise fails to meet the requirements of
paragraph 3, he or she will de deemed to have elected to withdraw
from the Plan and the Contributions credited to his or her
account will be returned to him or her and his or her option
terminated.
(d) A participant's withdrawal during an Offering Period
will not in itself have any effect upon his or her eligibility to
participate in a succeeding Offering Period or in any similar
plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the Contributions of
a participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Common Stock which
shall be made available for sale under the Plan shall be 324,610
shares, subject to adjustment upon changes in capitalization of
the Company as provided in paragraph 18. If the total number of
shares which would otherwise be subject to options granted
pursuant to Plan paragraph 7(a) on the Offering Date of an
Offering Period exceeds the number of shares then available under
the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it
shall determine to be equitable. In such event, the Company
shall give written notice of such reduction of the number of
shares subject to the option to each participant affected
thereby and shall similarly reduce the rate of Contributions, if
necessary.
(b) The participant will have no interest or voting right
in shares covered by his or her option until such option has been
exercised.
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant, or, if the
participant so directs, by written notice to the Company prior to
the Exercise Date, in the names of the participant and one other
person designated by the participant, as joint tenants with
rights of survivorship, to the extent permitted by applicable
law.
(d) Shares of Common Stock purchased under the terms of the
Plan by a participant, including participants who are subject to
Section 16 of the Securities Exchange Act of 1934 may not be sold
prior to the expiration of one (1) year from the Exercise Date
upon which such shares were purchased except in the event of the
participant's disability, as determined by the Company, or death.
13. Administration. The Board, or a committee designated by the
Board, shall supervise and administer the Plan and shall have
full power to adopt, amend and rescind any rules deemed desirable
and appropriate for the administration of the Plan and not
inconsistent with the Plan, to construe and interpret the Plan,
and to make all other determinations necessary or advisable for
the administration of the Plan.
14. Designation of Beneficiary.
(a) A participant may file with the Company a written
designation of a beneficiary who is to receive any cash to his or
her credit under the Plan in the event of the participant's death
before an Exercise Date, or any shares of Common Stock and cash
to his or her credit under the Plan in the event of the
participant's death on or after an Exercise Date but prior to the
delivery of such shares and cash. A beneficiary may be changed
by the participant at any time by notice in writing to the
Company.
(b) Upon the death of a participant and upon receipt by the
Company of proof of the identity and existence at the time of the
participant's death of a beneficiary designated by the
participant in accordance with the immediately preceding
subparagraph, the Company shall deliver such shares or cash, or
both, to the beneficiary. In the event a participant dies and is
not survived by a then living or in existence beneficiary
designated by him in accordance with the immediately preceding
subparagraph, the Company shall deliver such shares or cash, or
both, to the personal representative of the estate of the
deceased participant. If to the knowledge of the Company no
personal representative has been appointed within ninety (90)
days following the date of the participant's death, the Company,
in its discretion, may deliver such shares or cash, or both, to
the surviving spouse of the deceased participant, or to any one
or more dependents or relatives of the deceased participant, or
if no spouse, dependent or relative is known to the Company then
to such other person as the Company may designate.
(c) No designated beneficiary shall, prior to the death of
the participant by whom the beneficiary has been designated,
acquire any interest in the shares or cash credited to the
participant under the Plan.
15. Transferability. Neither Contributions credited to a
participant's account nor any rights with regard to the exercise
of an option or to receive shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other
than will, the laws of descent and distribution, or as otherwise
provided in paragraph 14) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be
without effect, except that the Company may treat such act as an
election to withdraw funds in accordance with paragraph 10.
16. Use of Funds. All Contributions received or held by the
Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to
segregate such Contributions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of accounts will be given to
participating Employees as soon as practicable following the
Exercise Date, which statements will set forth the amounts of
Contributions, the per share purchase price, the number of shares
purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization: Corporate
Transactions.
In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization,
reclassification, stock split, combination of shares or dividend
payable in shares of Common Stock, an appropriate adjustment
shall be made by the Company to the number and kind of shares
available for the granting of purchase opportunities, or as to
which outstanding purchase opportunities shall be exercisable,
and to the purchase price. No fractional shares shall be issued
or optioned in making any such adjustments. All adjustments made
by the Company under this paragraph shall be conclusive.
Subject to any required action by the shareholders, if the
Company shall be a party to any reorganization involving merger
or consolidation with respect to which the Company will not be
the surviving entity or acquisition of substantially all of the
stock or assets of the Company, the Company in its discretion
(a) may declare the Plan's termination in the same manner as if
the Board had terminated the Plan pursuant to paragraph 19 below,
or (b) may declare that any purchase opportunity granted
hereunder shall pertain to and apply with appropriate adjustment
as determined by the Board to the securities of the resulting
corporation to which a holder of the number of shares of Common
Stock subject to the purchase opportunity would have been
entitled.
Any issue by the Company of any class of preferred stock, or
securities convertible into shares of common or preferred stock
of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or purchase
price of shares of Common Stock subject to any purchase
opportunity except as specifically provided otherwise in this
paragraph 18. The grant of a purchase opportunity pursuant to
the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer all or
any part of its business or assets.
19. Amendment or Termination.
(a) The Board may at any time terminate or amend the Plan.
Except as provided in paragraph 19, no such termination may
effect options previously granted, nor may an amendment make any
change in any option theretofore granted which adversely affects
the rights of any participant.
(b) Prior approval of the stockholders of the Company shall be
required with respect to any amendment which would require the
sale of more shares than are authorized under paragraph 12(a).
(c) If required by Rule 16b-3 under the Exchange Act, or under
Section 423 of the Code (or any successor rule or provision or
any applicable law or regulation), the Company shall obtain
shareholder approval in such a manner and to such a degree as so
required.
(d) The Board shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering Period, permit payroll
withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company's
processing or properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and
crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond
with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board
determines in its sole discretion advisable which are consistent
with the Plan.
20. Notices. All notices or other communications by a
participant to the Company under or in connection with the Plan
shall be deemed to have been duly given when received in the form
specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be
issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law,
domestic or foreign, including without limitations, the
Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements of
any stock exchange upon which the shares may then be listed, and
shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and
warrant at the time of any such exercise that the shares are
being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any
of the aforementioned applicable provisions of law.
22. Term of Plan: Effective Date. The Plan shall become
effective upon the earlier to occur of its adoption by the Board
or its approval by the stockholders of the Company. It shall
continue in effect until terminated under paragraph 19.
23. Additional Restrictions of Rule 16b-3. The terms and
conditions of options granted hereunder to, and the purchase of
shares by, persons subject to Officers shall comply with the
applicable provisions of Rule 16b-3. This Plan shall be deemed
to contain, and such options shall contain, and the shares issued
upon exercise thereof shall be subject to, such additional
conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange
Act with respect to Plan transactions.
24. No Contract. This Plan shall not be deemed to constitute a
contract between the Company or any Subsidiary and any eligible
Employee or to be a consideration or an inducement for the
employment of any Employee. Nothing contained in this Plan shall
be deemed to give any Employee the right to be retained in the
service of the Company or any Subsidiary or to interfere with the
right of the Company or any Subsidiary to discharge any Employee
at any time regardless of the effect which such discharge shall
have upon him or her or as a participant of the Plan.
25. Waiver. No liability whatever shall attach to or be
incurred by any past, present or future shareholders, officers or
directors, as such, of the Company or any Subsidiary, under or by
reason of any of the terms, conditions or agreements contained in
this Plan or implied therefrom, and any and all liabilities of,
and any and all rights and claims against, the Company or any
Subsidiary, or any shareholder, officer or director as such,
whether arising at common law or in equity or created by statute
or constitution or otherwise, pertaining to this Plan, are hereby
expressly waived and released by every eligible Employee as a
part of the consideration for any benefits by the Company under
this Plan.
26. Securities Law Restrictions. The Company reserves the right
to place an appropriate legend on any certificate representing
shares of Common Stock issuable under the Plan with any such
legend reflecting restrictions on the transfer of the shares as
may be necessary to assure the availability of applicable
exemptions under federal and state securities laws.
27. Approval of Stockholders. The Plan shall be submitted to
the stockholders of the Company for their approval within twelve
(12) months after the adoption of the Plan by the Board. The
Plan is conditioned upon the approval of the stockholders of the
Company, and failure to receive their approval shall render the
Plan and all outstanding options issued thereunder void and of no
effect.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed as of this _______ day of ____________________, 1999.
CITIZENS BANCSHARES CORPORATION
By: ________________________________
Title: ________________________________
APPENDIX B
CITIZENS BANCSHARES CORPORATION
1999 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS
1.1 Definitions 2
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan 3
2.2 Stock Subject to the Plan 5
2.3 Administration of the Plan 5
2.4 Eligibility and Limits 6
SECTION 3 TERMS OF OPTIONS
3.1 General Terms and Conditions 6
3.2 Other Terms and Conditions. 7
(a) Option Price 7
(b) Option Term 6
(c) Payment. 8
(d) Conditions to the Exercise of an Option. 8
(e) Termination of Incentive Stock Option. 8
(f)Special Provisions for Certain Substitute Options. 7
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. 8
4.2 Restrictions on Transfer. 9
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. 8
5.2 Changes in Capitalization; Merger; Liquidation. 8
5.3 Cash Awards 9
5.4 Compliance with Code. 10
5.5 Right to Terminate Service. 10
5.6 Non-alienation of Benefits. 10
5.7 Termination and Amendment of the Plan. 10
5.8 Stockholder Approval. 10
5.9 Choice of Law. 10
5.10 Effective Date of Plan. 10
CITIZENS BANCSHARES CORPORATION
1999 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 Definitions. Whenever used herein, the masculine
pronoun shall be deemed to include the feminine, and the
singular to include the plural, unless the context clearly
indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "Board of Directors" means the board of directors
of the Company.
(b) "Change in Control" means, as used in a Stock
Incentive Agreement, any one of the following events which may
occur after the date the Stock Incentive is granted:
(1) the acquisition by any individual, entity or
"group," within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Securities Exchange Act of 1934, as amended, (a
"Person") of beneficial ownership (within the meaning of Rule 13d-
3 promulgated under the Securities Exchange Act of 1934) of
voting securities of the Company where such acquisition causes
any such Person to own twenty-five percent (25%) or more of the
combined voting power of the then outstanding voting securities
then entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); provided, however, that for
purposes of this Section 1(b)(1), the following shall not be
deemed to result in a Change in Control, (i) any acquisition
directly from the Company, unless such a Person subsequently
acquires additional shares of Outstanding Voting Securities other
than from the Company, in which case any such subsequent
acquisition shall be deemed to be a Change in Control; or (ii)
any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any affiliate of the
Company;
(2) a merger, consolidation, share exchange,
combination, reorganization or like transaction involving the
Company in which the stockholders of the Company immediately
prior to such transaction do not own at least fifty percent (50%)
of the value or voting power of the issued and outstanding
capital stock of the Company or its successor immediately after
such transaction;
(3) the sale or transfer (other than as security
for the Company's obligations) of more than fifty percent (50%)
of the assets of the Company in any one transaction or a series
of related transactions occurring within a one (1) year period in
which the Company, any corporation controlled by the Company or
the stockholders of the Company immediately prior to the
transaction do not own at least fifty percent (50%) of the value
or voting power of the issued and outstanding equity securities
of the acquiror immediately after the transaction;
(4) the sale or transfer of more than fifty
percent (50%) of the value or voting power of the issued and
outstanding capital stock of the Company by the holders thereof
in any one transaction or a series of related transactions
occurring within a one (1) year period in which the Company, any
corporation controlled by the Company or the stockholders of the
Company immediately prior to the transaction do not own at least
fifty percent (50%) of the value or voting power of the issued
and outstanding equity securities of the acquiror immediately
after the transaction; or
(5) the dissolution or liquidation of the
Company.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
(d) "Committee" means the committee appointed by the
Board of Directors to administer the Plan pursuant to Plan
Section 2.3.
(e) "Company" means Citizens Bancshares Corporation, a
bank holding company organized under the laws of the State of
Georgia.
(f) "Death" means the death of the Participant.
(g) "Disability" has the same meaning as provided in
the long-term disability plan or policy maintained or, if
applicable, most recently maintained, by the Company or, if
applicable, any affiliate for the Participant. If no long-term
disability plan or policy was ever maintained on behalf of the
Participant or, if the determination of Disability relates to an
Incentive Stock Option, Disability shall mean that condition
described in Code Section 22(e)(3), as amended from time to time.
In the event of a dispute, the determination of Disability shall
be made by the Board of Directors and shall be supported by
advice of a physician competent in the area to which such
Disability relates.
(h) "Disposition" means any conveyance, sale,
transfer, assignment, pledge or hypothecation, whether outright
or as security, inter vivos or testamentary, with or without
consideration, voluntary or involuntary.
(i) "Fair Market Value" means the closing price at
which sales of Stock shall have been sold on the most recent
trading date immediately prior to the date of determination, as
reported by any such exchange or system selected by the Committee
on which the shares of Stock are traded. If the shares of Stock
are not traded on any exchange or system as of the determination
date, Fair Market Value shall mean the fair market value of a
share of Stock as determined by the Committee taking into account
such facts and circumstances deemed to be material by the
Committee to the value of the Stock in the hands of the
Participant; provided that, for purposes of granting awards other
than Incentive Stock Options, Fair Market Value of a share of
Stock may be determined by the Committee by reference to the
average market value determined over a period certain or as of
specified dates, to a tender offer price for the shares of Stock
(if settlement of an award is triggered by such an event) or to
any other reasonable measure of fair market value and provided
further that, for purposes of granting Incentive Stock Options,
Fair Market Value of a share of Stock shall be determined in
accordance with the valuation principles described in the
regulations promulgated under Code Section 422.
(j) "Incentive Stock Option" means an incentive stock
option, as defined in Code Section 422, described in Plan Section
3.2.
(k) "Non-Qualified Stock Option" means a stock option,
other than an option qualifying as an Incentive Stock Option,
described in Plan Section 3.2.
(l) "Option" means a Non-Qualified Stock Option or an
Incentive Stock Option.
(m) "Over 10% Owner" means an individual who at the
time an Incentive Stock Option is granted owns Stock possessing
more than 10% of the total combined voting power of the Company
or one of its Parents or Subsidiaries, determined by applying the
attribution rules of Code Section 424(d).
(n) "Parent" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the
Company if, with respect to Incentive Stock Options, at the time
of granting of the Incentive Stock Option, each of the
corporations other than the Company owns stock possessing 50% or
more of the total combined voting power of all classes of stock
in one of the other corporations in the chain.
(o) "Participant" means an individual who receives an
Option hereunder.
(p) "Plan" means the Citizens Bancshares Corporation
1999 Stock Incentive Plan.
(q) "Stock" means the Company's common stock, $1.00
par value per share.
(r) "Stock Incentive Agreement" means an agreement
between the Company and a Participant or other documentation
evidencing an award of an Option.
(s) "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company if, with respect to Incentive Stock Options, at the time
of the granting of the Incentive Stock Option, each of the
corporations other than the last corporation in the unbroken
chain owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other
corporations in the chain.
(t) "Termination of Service" means the termination of
the service relationship, whether employment or otherwise,
between a Participant and the Company and its affiliates,
regardless of the fact that severance or similar payments are
made to the Participant for any reason, including, but not by way
of limitation, a termination by resignation, discharge, Death,
Disability or retirement. The Committee shall, in its absolute
discretion, determine the effect of all matters and questions
relating to Termination of Service, including, but not by way of
limitation, the question of whether a leave of absence
constitutes a Termination of Service.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 Purpose of the Plan. The Plan is intended to (a)
provide incentive to officers, employees, directors and
consultants of the Company and any affiliates to stimulate
their efforts toward the continued success of the
Company and to operate and manage the business in a manner that
will provide for the long-term growth and profitability of the
Company; (b) encourage stock ownership by officers, employees,
directors and consultants by providing them with a means to
acquire a proprietary interest in the Company by acquiring shares
of Stock or to receive compensation which is based upon
appreciation in the value of Stock; and (c) provide a means of
obtaining and rewarding key personnel.
2.2 Stock Subject to the Plan. Subject to adjustment
in accordance with Section 5.2, 324,610 shares of Stock
(the "Maximum Plan Shares") are hereby reserved exclusively
for issuance pursuant to Options. At no time shall the
Company have outstanding Options and shares of
Stock issued in respect of Options in excess of the Maximum Plan
Shares. The shares of Stock attributable to the nonvested,
unpaid, unexercised, unconverted or otherwise unsettled portion
of any Option that is forfeited or cancelled or expires or
terminates for any reason without becoming vested, paid,
exercised, converted or otherwise settled in full shall again be
available for purposes of the Plan.
2.3 Administration of the Plan. The Plan shall be
administered by the Committee. The Committee shall have
full authority in its discretion to determine the
officers, employees, directors and consultants of the
Company or any affiliates to whom Options shall be granted
and the terms and provisions of Options, subject to the Plan.
Subject to the provisions of the Plan and the authority of the
Board of Directors, the Committee shall have full and conclusive
authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; to determine the
terms and provisions of the respective Stock Incentive Agreements
and to make all other determinations necessary or advisable for
the proper administration of the Plan. The Committee's
determinations under the Plan need not be uniform and may be made
by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are
similarly situated). The Committee's decisions shall be final
and binding on all Participants.
The Committee shall consist of at least two members of the
Board of Directors and, during those periods that the Company is
subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, the Board of Directors shall consider the
advisability of whether each such appointee shall qualify as a
"non-employee director", as that term is defined in Rule 16b-3 as
then in effect under the Securities Exchange Act of 1934, and,
during those periods that the Company has issued equity
securities required to be registered under Section 12 of the
Securities Exchange Act of 1934, the Board of Directors shall
consider the advisability of whether each such appointee shall
separately qualify as an "outside director", within the meaning
of Code Section 162(m) and the regulations promulgated
thereunder. Each member of the Committee shall serve at the
pleasure of the Board of Directors and the Board of Directors may
from time to time remove members from or add members to the
Committee. Vacancies on the Committee shall be filled by the
Board of Directors.
The Committee shall select one of its members as Chairman
and shall hold meetings at the times and in the places as it may
deem advisable. Acts approved by a majority of the Committee in
a meeting at which a quorum is present, or acts reduced to or
approved in writing by a majority of the members of the
Committee, shall be the valid acts of the Committee.
2.4 Eligibility and Limits. Options may be granted only to
officers, employees, directors and consultants of the Company or
any affiliate; provided, however, that an Incentive Stock Option
may only be granted to an employee of the Company or any Parent
or Subsidiary. In the case of Incentive Stock Options, the
aggregate Fair Market Value (determined as at the date an
Incentive Stock Option is granted) of Stock with respect to which
stock options intended to meet the requirements of Code Section 422
become exercisable for the first time by an individual during any
calendar year under all plans of the Company and its Parents and
Subsidiaries shall not exceed $100,000; provided further, that
if the limitation is exceeded, the Incentive Stock Option(s) which
cause the limitation to be exceeded shall be treated as
Non-Qualified Stock Option(s); except as the terms of the
Stock Incentive Agreement may expressly provide otherwise. To the
extent required under Code Section 162(m) and regulations thereunder
for compensation to be treated as qualified performance-based
compensation, subject to adjustment in accordance with Section 5.2,
the maximum number of shares Stock with respect to which Options may
be granted during any single fiscal year of the Company to any employee
shall not exceed 100,000.
SECTION 3 TERMS OF OPTIONS
3.1 General Terms and Conditions.
(a) The number of shares of Stock as to which
an Option shall be granted shall be determined by the Committee
in its sole discretion, subject to the provisions of Section 2.2
as to the total number of shares available for grants under the
Plan. If a Stock Incentive Agreement so provides, a Participant
may be granted a new Option to purchase a number of shares of
Stock equal to the number of previously owned shares of Stock
tendered in payment of the Exercise Price (as defined below) for
each share of Stock purchased pursuant to the terms of the Stock
Incentive Agreement.
(b) Each Option shall be evidenced by a Stock
Incentive Agreement in such form and containing such terms,
conditions and restrictions as the Committee may determine is
appropriate. Each Stock Incentive Agreement shall be subject to
the terms of the Plan and any provision in a Stock Incentive
Agreement that is inconsistent with the Plan shall be null and
void.
(c) The date an Option is granted shall be the date on
which the Committee has approved the terms and conditions of the
Stock Incentive Agreement and has determined the recipient of the
Option and the number of shares covered by the Option and has
taken all such other action necessary to complete the grant of
the Option.
(d) The Committee may provide in any Stock Incentive
Agreement (or subsequent to the award of an Option but prior to
its expiration or cancellation, as the case may be) that, in the
event of a Change in Control, the Option shall or may be cashed
out on the basis of any price not greater than the highest price
paid for a share of Stock in any transaction reported by any
market or system selected by the Committee on which the shares of
Stock are then actively traded during a specified period
immediately preceding or including the date of the Change in
Control or offered for a share of Stock in any tender offer
occurring during a specified period immediately preceding or
including the date the tender offer commences; provided that, in
no case shall any such specified period exceed one (1) year (the
"Change in Control Price"). For purposes of this Subsection, the
cash-out of an Option shall be on the basis of the excess, if
any, of the Change in Control Price (but not more than the Fair
Market Value of the Stock on the date of the cash-out in the case
of Incentive Stock Options) over the Exercise Price with or
without regard to whether the Option may otherwise be exercisable
only in part.
(e) Any Option may be granted in connection with all
or any portion of a previously or contemporaneously granted
Option. Exercise or vesting of an Option granted in connection
with another Option may result in a pro rata surrender or
cancellation of any related Option, as specified in the
applicable Stock Incentive Agreement.
(f) Options shall not be transferable or assignable
except by will or by the laws of descent and distribution and
shall be exercisable, during the Participant's lifetime, only by
the Participant; in the event of the Disability of the
Participant, by the legal representative of the Participant; or
in the event of the Death of the Participant, by the personal
representative of the Participant's estate or if no personal
representative has been appointed, by the successor in interest
determined under the Participant's will. Notwithstanding the
foregoing, an Optionee may transfer such Option for no
consideration at the discretion and with the approval of the
Committee.
3.2 Other Terms and Conditions. Each Option granted
under the Plan shall be evidenced by a Stock Incentive
Agreement. At the time any Option is granted, the Committee
shall determine whether the Option is to be an Incentive
Stock Option or a Non-Qualified Stock Option, and the
Option shall be clearly identified as to its status as an
Incentive Stock Option or a Non-Qualified Stock Option. At the
time any Incentive Stock Option is exercised, the Company shall
be entitled to place a legend on the certificates representing
the shares of Stock purchased pursuant to the Option to clearly
identify them as shares of Stock purchased upon exercise of an
Incentive Stock Option. An Incentive Stock Option may only be
granted within ten (10) years from the earlier of the date the
Plan is adopted by the Board of Directors or approved by the
Company's stockholders.
(a) Option Price. Subject to adjustment
in accordance with Section 5.2 and the other
provisions of this Section 3.2, the exercise price (the "Exercise
Price") per share of Stock purchasable under any Option shall be
as set forth in the applicable Stock Incentive Agreement. With
respect to each grant of an Incentive Stock Option to a
Participant who is not an Over 10% Owner or to each grant of any
Option to a Participant who is then a "covered employee," within
the meaning of Code Section 162(m), the Exercise Price per share
shall not be less than the Fair Market Value on the date the
Option is granted. With respect to each grant of an Incentive
Stock Option to a Participant who is an Over 10% Owner, the
Exercise Price shall not be less than 110% of the Fair Market
Value on the date the Option is granted.
(b) Option Term. The term of an Option shall
be as specified in the applicable Stock Incentive
Agreement; provided, however that any Incentive Stock Option
granted to a Participant who is not an Over 10% Owner shall not
be exercisable after the expiration of ten (10) years after the
date the Option is granted and any Incentive Stock Option granted
to an Over 10% Owner shall not be exercisable after the
expiration of five (5) years after the date the Option is
granted.
(c) Payment. Payment for all shares of Stock
purchased pursuant to exercise of an Option shall be made
in any form or manner authorized by the Committee in the Stock
Incentive Agreement or by amendment thereto, including, but not
limited to, cash or, if the Stock Incentive Agreement provides,
(1) by delivery to the Company of a number of shares of Stock
which have been owned by the holder for at least six (6) months
prior to the date of exercise having an aggregate Fair Market
Value of not less than the product of the Exercise Price
multiplied by the number of shares the Participant intends to
purchase upon exercise of the Option on the date of delivery;
(2) in a cashless exercise through a broker; or (3) by having a
number of shares of Stock withheld, the Fair Market Value of
which as of the date of exercise is sufficient to satisfy the
Exercise Price. In its discretion, the Committee also may
authorize (at the time an Option is granted or thereafter)
Company or affiliate financing to assist the Participant as to
payment of the Exercise Price on such terms as may be offered by
the Committee in its discretion. Payment shall be made at the
time that the Option or any part thereof is exercised, and no
shares shall be issued or delivered upon exercise of an option
until full payment has been made by the Participant. The holder
of an Option, as such, shall have none of the rights of a
stockholder.
(d) Conditions to the Exercise of an Option.
Each Option granted under the Plan shall be exercisable
by whom, at such time or times, or upon the occurrence
of such event or events, and in such amounts, as the
Committee shall specify in the Stock Incentive Agreement;
provided, however, that subsequent to the grant of an
Option, the Committee, at any time before complete
termination of such Option, may accelerate the time or times at
which such Option may be exercised in whole or in part,
including, without limitation, upon a Change in Control and may
permit the Participant or any other designated person to exercise
the Option, or any portion thereof, for all or part of the
remaining Option term notwithstanding any provision of the Stock
Incentive Agreement to the contrary.
(e) Termination of Incentive Stock Option.
With respect to an Incentive Stock Option, in the event
of the Termination of Service of a Participant, the Option
or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable
no later than the elapse of thirty (30) days from the
date of Termination of Service, regardless of whether
such Termination of Service is voluntary or involuntary. For
purposes of this Subsection (e), Termination of Service of the
Participant shall not be deemed to have occurred if the
Participant is employed by another corporation (or a parent or
subsidiary corporation of such other corporation) which has
assumed the Incentive Stock Option of the Participant in a
transaction to which Code Section 424(a) is applicable.
(f) Special Provisions for Certain Substitute
Options. Notwithstanding anything to the contrary in this
Section 3.2, any Option issued in substitution for an option
previously issued by another entity, which substitution occurs in
connection with a transaction to which Code Section 424(a) is
applicable, may provide for an exercise price computed in
accordance with such Code Section and the regulations thereunder
and may contain such other terms and conditions as the Committee
may prescribe to cause such substitute Option to contain as
nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained
in the previously issued option being replaced thereby.
SECTION 4 RESTRICTIONS ON STOCK
4.1 Escrow of Shares. Any certificates representing
the shares of Stock issued under the Plan shall be issued in
the Participant's name, but, if the Stock Incentive Agreement
so provides, the shares of Stock shall be held by a
custodian designated by the Committee (the "Custodian").
Each applicable Stock Incentive Agreement providing
for transfer of shares of Stock to the Custodian shall
appoint the Custodian as the attorney-in-fact for the Participant
for the term specified in the applicable Stock Incentive
Agreement, with full power and authority in the Participant's
name, place and stead to transfer, assign and convey to the
Company any shares of Stock held by the Custodian for such
Participant, if the Participant forfeits the shares under the
terms of the applicable Stock Incentive Agreement. During the
period that the Custodian holds the shares subject to this
Section, the Participant shall be entitled to all rights, except
as provided in the applicable Stock Incentive Agreement,
applicable to shares of Stock not so held. Any dividends
declared on shares of Stock held by the Custodian shall, as the
Committee may provide in the applicable Stock Incentive
Agreement, be paid directly to the Participant or, in the
alternative, be retained by the Custodian until the expiration of
the term specified in the applicable Stock Incentive Agreement
and shall then be delivered, together with any proceeds, with the
shares of Stock to the Participant or to the Company, as
applicable.
4.2 Restrictions on Transfer. The Participant shall
not have the right to make or permit to exist any
Disposition of the shares of Stock issued pursuant to
the Plan except as provided in the Plan or the applicable Stock
Incentive Agreement. Any Disposition of the shares of Stock
issued under the Plan by the Participant not made in accordance
with the Plan or the applicable Stock Incentive Agreement shall
be void. The Company shall not recognize, or have the duty to
recognize, any Disposition not made in accordance with the Plan
and the applicable Stock Incentive Agreement, and the shares so
transferred shall continue to be bound by the Plan and the
applicable Stock Incentive Agreement.
SECTION 5 GENERAL PROVISIONS
5.1 Withholding. The Company shall deduct from
all cash distributions under the Plan any taxes required
to be withheld by federal, state or local government.
Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan, the Company shall have the right
to require the recipient to remit to the Company an amount
sufficient to satisfy any federal, state and local withholding
tax requirements prior to the delivery of any certificate or
certificates for such shares. A Participant may pay the
withholding tax in cash, or, if the applicable Stock Incentive
Agreement provides, a Participant may elect to have the number of
shares of Stock he is to receive reduced by the smallest number
of whole shares of Stock which, when multiplied by the Fair
Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and
local, if any, withholding taxes arising from exercise of an
Option (a "Withholding Election"). A Participant may make a
Withholding Election only if both of the following conditions are
met:
(a) The Withholding Election must be made on or prior
to the date on which the amount of tax required to be withheld is
determined (the "Tax Date") by executing and delivering to the
Company a properly completed notice of Withholding Election as
prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable;
however, the Committee may in its sole discretion disapprove and
give no effect to the Withholding Election.
5.2 Changes in Capitalization; Merger; Liquidation.
(a) The number of shares of Stock reserved for the
grant of Options; the number of shares of Stock reserved for
issuance upon the exercise of each outstanding Option and the
Exercise Price of each outstanding Option shall be
proportionately adjusted for any increase or decrease in the
number of issued shares of Stock resulting from a subdivision or
combination of shares or the payment of an ordinary stock
dividend in shares of Stock to holders of outstanding shares of
Stock or any other increase or decrease in the number of shares
of Stock outstanding effected without receipt of consideration by
the Company.
(b) In the event of any merger, consolidation,
extraordinary dividend (including a spin-off), reorganization or
other change in the corporate structure of the Company or its
Stock or tender offer for shares of Stock, the Committee, in its
sole discretion, may make such adjustments with respect to awards
and take such other action as it deems necessary or appropriate
to reflect or in anticipation of such merger, consolidation,
extraordinary dividend, reorganization, other change in corporate
structure or tender offer, including, without limitation, the
substitution of new awards, the termination, cashout or
adjustment of outstanding awards, the acceleration of awards or
the removal of restrictions on outstanding awards, all as may be
provided in the applicable Stock Incentive Agreement or, if not
expressly addressed therein, as the Committee subsequently may
determine in the event of any such merger, consolidation,
extraordinary dividend (including a spin-off), reorganization or
other change in the corporate structure of the Company or its
Stock or tender offer for shares of Stock. Any adjustment
pursuant to this Section 5.2 may provide, in the Committee's
discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any
Option.
(c) The existence of the Plan and the Options granted
pursuant to the Plan shall not affect in any way the right or
power of the Company to make or authorize any adjustment,
reclassification, reorganization or other change in its capital
or business structure, any merger or consolidation of the
Company, any issue of debt or equity securities having
preferences or priorities as to the Stock or the rights thereof,
the dissolution or liquidation of the Company, any sale or
transfer of all or any part of its business or assets, or any
other corporate act or proceeding.
5.3 Cash Awards. The Committee may, at any time and in
its discretion, grant to any holder of an Option the
right to receive, at such times and in such amounts as determined
by the Committee in its discretion, a cash amount which is
intended to reimburse such person for all or a portion of the
federal, state and local income taxes imposed upon such person as
a consequence of the receipt of the Option or the exercise of
rights thereunder.
5.4 Compliance with Code. All Incentive Stock Options
to be granted hereunder are intended to comply with Code
Section 422, and all provisions of the Plan and
all Incentive Stock Options granted hereunder shall be construed
in such manner as to effectuate that intent.
5.5 Right to Terminate Service. Nothing in the Plan or
in any Stock Incentive Agreement shall confer upon any
Participant the right to continue as an employee, officer,
director or consultant of the Company or any of its affiliates
or affect the right of the Company or any of its affiliates to
terminate the Participant's service at any time.
5.6 Non-alienation of Benefits. Other than as
specifically provided with regard to the Death of a
Participant, no benefit under the Plan shall be
subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge; and any
attempt to do so shall be void. No such benefit shall, prior to
receipt by the Participant, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or
torts of the Participant.
5.7 Termination and Amendment of the Plan. The Board of
Directors at any time may amend or terminate the Plan without
stockholder approval; provided, however, that the Board of
Directors may condition any amendment on the approval of
stockholders of the Company if such approval is necessary or
advisable with respect to tax, securities or other applicable laws.
No such termination or amendment without the consent of the holder
of an Option shall adversely affect the rights of the Participant
under such Option.
5.8 Stockholder Approval. The Plan shall be submitted
to the stockholders of the Company for their approval within
twelve (12) months before or after its adoption by the Board
of Directors. If such approval is not obtained, any Option granted
under the Plan shall be void.
5.9 Choice of Law. The laws of the State of Georgia shall
govern the Plan, to the extent not preempted by federal law.
5.10 Effective Date of Plan. The Plan shall become effective upon
the date the Plan is approved by the Board of Directors.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed as of this 22nd day of January, 1999.
CITIZENS BANCSHARES CORPORATION
By:__________________________________
Title:________________________________
ATTEST:
______________________________
Secretary
[CORPORATE SEAL]
