<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
CHARTER ONE FINANCIAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[Charter One Logo]
CHARTER ONE FINANCIAL, INC.
1215 Superior Avenue
Cleveland, Ohio 44114
(216) 566-5300
---------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 22, 1998
---------------------------
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of Charter One Financial, Inc. ("Charter One" or the
"Corporation") will be held on Wednesday, April 22, 1998, at 2:00 p.m. at the
English Oak Room, Tower City Center, 230 West Huron Road, Cleveland, Ohio, for
the following purposes:
1. To elect seven directors each for a three-year term (Proposal 1);
2. To ratify the appointment by the Board of Directors of the firm of
Deloitte & Touche LLP as independent auditors of the Corporation
for the fiscal year ending December 31, 1998 (Proposal 2); and
3. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Pursuant to the Bylaws, the Board of Directors has fixed the close of
business on February 27, 1998 as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. A complete
list of shareholders entitled to vote at the Annual Meeting will be available
for inspection by shareholders at the offices of the Corporation during the 10
days prior to the Annual Meeting, as well as at the Annual Meeting. Only holders
of Common Stock of record at the close of business on that date will be entitled
to notice of and to vote at the Annual Meeting or any adjournment thereof. In
the event that there are not sufficient votes to approve any one or more of the
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned to permit further solicitation of proxies by the Corporation.
By Order of the Board of Directors
/s/CHARLES JOHN KOCH
--------------------------------
Charles John Koch
Chairman of the Board, President
and Chief Executive Officer
Cleveland, Ohio
March 25, 1998
================================================================================
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
================================================================================
<PAGE> 3
CHARTER ONE FINANCIAL, INC.
1215 Superior Avenue
Cleveland, Ohio 44114
(216) 566-5300
---------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1998
This Proxy Statement is furnished to shareholders of Charter One
Financial, Inc. ("Charter One" or the "Corporation"), a Delaware corporation, in
connection with the solicitation by the Board of Directors of Charter One of
proxies to be used at the 1998 Annual Meeting of Shareholders (the "Annual
Meeting") to be held on April 22, 1998, at 2:00 p.m. at the English Oak Room,
Tower City Center, 230 West Huron Road, Cleveland, Ohio, and at any adjournments
thereof.
SOLICITATION AND REVOCABILITY OF PROXIES
If the enclosed form of proxy is properly executed and returned to the
Corporation in time to be voted at the Annual Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon.
Executed but unmarked proxies will be voted FOR Proposal 1 to elect the nominees
of the Board of Directors as directors; and FOR Proposal 2 to ratify the
appointment by the Board of Directors of the firm of Deloitte & Touche LLP as
independent auditors of the Corporation for the fiscal year ending December 31,
1998. As to any other matters presented at the Annual Meeting, the shares for
which properly executed proxies have been received will be voted in accordance
with the discretion of the proxies.
This Proxy Statement is initially being mailed to shareholders on or
about March 25, 1998. The presence of a shareholder at the Annual Meeting will
not automatically revoke such shareholder's proxy. Shareholders may, however,
revoke a proxy at any time prior to its exercise by delivering to the
Corporation a duly executed proxy bearing a later date, by attending the Annual
Meeting and voting in person, or by filing written notice of revocation with
Robert J. Vana, Secretary of the Corporation, at 1215 Superior Avenue,
Cleveland, Ohio 44114.
The cost of soliciting proxies in the form enclosed herewith will be
borne by the Corporation. In addition to the solicitation of proxies by mail,
the Corporation, through its directors, officers and regular employees, may also
solicit proxies personally or by telephone or telegraph. The Corporation will
also request persons, firms and corporations holding shares in their names or in
the name of their nominees, which are beneficially owned by others, to send
proxy material to, and obtain proxies from, such beneficial owners and will
reimburse such holders for their reasonable expenses in doing so. The
Corporation may engage a proxy soliciting firm to assist in the solicitation of
proxies. The cost of such a firm would not be expected to exceed $7,500.
OUTSTANDING VOTING SECURITIES
The securities which can be voted at the Annual Meeting consist of
shares of common stock of the Corporation (the "Common Stock") with each share
entitling its owner to one vote on all matters. The close of business on
February 27, 1998 has been fixed by the Board of Directors as the record date
for determination of shareholders entitled to vote at the Annual Meeting. The
number of shares of Common Stock outstanding on February 27, 1998 was
63,992,762. The presence, in person or by proxy, of at least the majority of the
total number of outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Any
proxies marked as abstentions, and any shares held in street name which have
been designated by brokers on proxy cards as not voted ("broker nonvotes"), will
not be counted as votes cast. Any proxies marked as abstentions or as broker
nonvotes will, however, be treated as shares present for purposes of determining
whether a quorum is present.
1
<PAGE> 4
1
Listed in the following table are beneficial owners as of February 27,
1998 of more than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE SHARES
NAME AND ADDRESS OF OF BENEFICIAL OF COMMON STOCK
BENEFICIAL OWNER OWNERSHIP OUTSTANDING
------------------- ------------------- -----------------
<S> <C> <C>
FMR Corporation ......................................................... 4,030,140(1) 6.30%
82 Devonshire Street
Boston, MA 02109
Pioneering Management Corporation ....................................... 3,282,550(2) 5.13%
60 State Street
Boston, MA 02109
</TABLE>
- ----------------------
(1) Included are 339,652 shares as to which the reporting party has sole power
to vote and no shares as to which shared voting may be exercised. The
reporting party has sole power to dispose of the entire 4,030,140 shares.
(2) The reporting party has sole power to vote and dispose of the entire
3,282,550 shares.
The following table sets forth, as of February 27, 1998, certain
information as to each of the named executive officers and directors, and all
executive officers and directors as a group.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE SHARES
NAME OF OF BENEFICIAL OF COMMON STOCK
BENEFICIAL OWNERSHIP OUTSTANDING
OWNER (1)(2)(3)(4)
---------------- -------------------- ----------------
<S> <C> <C>
Charles John Koch, Chairman of the Board, 446,648(5) *
President and Chief Executive Officer
Mark D. Grossi, Director and Executive Vice President 254,247(6) *
John D. Koch, Director and Executive Vice President 264,873(7) *
Richard W. Neu, Director, Executive Vice President 304,267(8) *
and Chief Financial Officer
Robert J. Vana, Senior Vice President, 113,823(9) *
Chief Corporate Counsel and Secretary
Eugene B. Carroll, Sr., Director 12,186 *
Phillip Wm. Fisher, Director 718,749(10) 1.12%
Denise M. Fugo, Director 6,773(11) *
Charles M. Heidel, Director 6,230(12) *
Charles F. Ipavec, Director 103,028 *
Philip J. Meathe, Director 18,090(13) *
Michael P. Morley, Director 3,112(14) *
Henry R. Nolte, Jr., Director 8,819(15) *
Ronald F. Poe, Director 7,482(16) *
Victor A. Ptak, Director 14,328(17) *
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE SHARES
NAME OF OF BENEFICIAL OF COMMON STOCK
BENEFICIAL OWNER OWNERSHIP(1)(2)(3)(4) OUTSTANDING
------------------- --------------------- -----------------
<S> <C> <C>
Melvin J. Rachel, Director -- *
Jerome L. Schostak, Director 1,644,120(18) 2.57%
Mark Shaevsky, Director 33,498(19) *
Leonard S. Simon, Director 266,301(20) *
John P. Tierney, Director 2,980(21) *
Eresteen R. Williams, Director 3,689(22) *
All executive officers and directors as a group 4,233,243(23) 6.52%
(21 persons)
</TABLE>
- -------------------------
* Does not exceed 1%.
(1) Shares held under the Bank's employee savings plan are reported as of
December 31, 1997. Shares held under the Employee Stock Ownership Plan
(the "ESOP") are reported as of December 31, 1996. The ESOP allocation
for December 31, 1997 will not be completed until April 1998.
(2) Assumes exercise of stock options held by beneficial owner exercisable
within 60 days.
(3) Included are shares owned directly or indirectly through a trust or
corporation or by spouses and minor children, as to which the
beneficial owner exercises sole voting and dispositive power, except as
otherwise noted herein.
(4) For the executive officers, included are shares allocated to such
executive officers under the ESOP, as well as a proportionate share of
the unallocated shares, which are deemed to be beneficially owned by
the executive officers as a result of the executive officers' ability
to direct the trustee's voting of such shares through the vote of the
executive officers' allocated shares.
(5) Included are 182,268 shares Mr. Charles John Koch has the right to
purchase pursuant to stock options exercisable within 60 days.
(6) Included are 115,792 shares Mr. Grossi has the right to purchase
pursuant to stock options exercisable within 60 days.
(7) Included are 119,073 shares Mr. John D. Koch has the right to purchase
pursuant to stock options exercisable within 60 days.
(8) Included are 289,789 shares Mr. Neu has the right to purchase pursuant
to stock options exercisable within 60 days.
(9) Included are 56,227 shares Mr. Vana has the right to purchase pursuant
to stock options exercisable within 60 days.
(10) Included are 564,219 shares owned by Martinique Hotel, Inc., a personal
holding company as to which Mr. Fisher serves as a director and is a
shareholder.
(11) Included are 4,300 shares Ms. Fugo has the right to purchase pursuant
to stock options exercisable within 60 days.
(12) Included are 3,307 shares Mr. Heidel has the right to purchase pursuant
to stock options exercisable within 60 days.
(13) Included are 3,307 shares Mr. Meathe has the right to purchase pursuant
to stock options exercisable within 60 days.
(14) Included are 1,912 shares Mr. Morley has the right to purchase pursuant
to stock options exercisable within 60 days.
(15) Included are 3,307 shares Mr. Nolte has the right to purchase pursuant
to stock options exercisable within 60 days.
(16) Included are 3,824 shares Mr. Poe has the right to purchase pursuant to
stock options exercisable within 60 days.
(17) Included are 4,961 shares Mr. Ptak has the right to purchase pursuant
to stock options exercisable within 60 days.
(18) Included are 3,307 shares Mr. Schostak has the right to purchase
pursuant to stock options exercisable within 60 days.
(19) Included are 3,307 shares Mr. Shaevsky has the right to purchase
pursuant to stock options exercisable within 60 days.
(20) Included are 132,055 shares Mr. Simon has the right to purchase
pursuant to stock options exercisable within 60 days.
(21) Included are 956 shares Mr. Tierney has the right to purchase pursuant
to stock options exercisable within 60 days.
(22) Included are 3,307 shares Ms. Williams has the right to purchase
pursuant to stock options exercisable within 60 days.
(23) Included are 930,999 shares the directors and executive officers as a
group have the right to purchase pursuant to stock options exercisable
within 60 days.
3
<PAGE> 6
PROPOSAL 1 - ELECTION OF DIRECTORS
At the Annual Meeting, seven directors will be elected each for a
three-year term. Unless otherwise specified on the proxy, it is the intention of
the persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. Under Delaware law, directors are elected by a plurality of the votes
of the shares present in person or represented by proxy at a meeting and
entitled to vote on the election of directors. Votes may be cast in favor of or
withheld from each nominee; votes that are withheld will be excluded entirely
from the vote and will have no effect. The Board of Directors believes that the
nominees will stand for election and will serve if elected as directors.
However, if any of the persons nominated by the Board of Directors fails to
stand for election or will be unable to accept election, the proxies will be
voted for the election of such other persons as the Board of Directors may
recommend, or the size of the Board may be reduced to eliminate the vacancy. See
"Corporate Governance and Other Matters" for information on conditions relating
to the election of directors of Charter One.
INFORMATION AS TO NOMINEES AND CONTINUING DIRECTORS
Charter One is the parent holding company of Charter Michigan Bancorp,
Inc. ("Charter Michigan"), which is the parent company of Charter One Bank,
F.S.B. (the "Bank"). In 1995, Charter One completed a merger with FirstFed
Michigan Corporation ("FirstFed") and its principal subsidiary First Federal of
Michigan ("First Federal") (the "FirstFed Merger). In 1997, Charter One
completed a merger with RCSB Financial, Inc. ("RCSB") and its principal
subsidiary Rochester Community Savings Bank ("Rochester Bank") (the "RCSB
Merger").
The following tables set forth the names of the Board of Directors'
nominees for election as a director and those directors who will continue to
serve after the Annual Meeting. Also set forth is certain other information with
respect to each person's age at December 31, 1997, principal occupation or
employment during the past five years, the date the individual first became a
director of Charter One (including the Bank), FirstFed (including First Federal)
or RCSB (including Rochester Bank) and, if applicable, positions currently held
with the Corporation.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION First Became
NAME OR EMPLOYMENT Age a Director
---- ------------- --- ----------
Nominees for Terms Ending in 2001
<S> <C> <C> <C>
Eugene B. Carroll, Sr. President, Employer Sponsored Plans, Inc., a 73 1975
third-party health plan administrator in Cleveland,
Ohio, and agent for New England Mutual Life
Insurance Co.
Denise M. Fugo President of City Life Inc., a restaurant, 44 1993
banquet and catering company in Cleveland,
Ohio
Charles John Koch (1) Chairman of the Board, President and Chief 51 1973
Executive Officer of the Corporation
Henry R. Nolte, Jr. Of Counsel to Miller, Canfield, Paddock and 73 1983
Stone, a law firm headquartered in Detroit,
Michigan, and was a senior partner from 1989 to
1993; retired Vice President/General Counsel of
Ford Motor Company,
a vehicle manufacturer headquartered in Dearborn,
Michigan
Ronald F. Poe Chairman and Chief Executive Officer of Legg 59 1988
Mason Dorman & Wilson, Inc., a real estate
investment banking firm in White Plains, New
York; Director of the Federal Home Loan Mortgage
Corporation
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION First Became
NAME OR EMPLOYMENT Age a Director
---- ------------- --- ----------
<S> <C> <C> <C>
Jerome L. Schostak Vice Chairman of the Corporation since the FirstFed 64 1985
Merger; Chairman of the Board and Chief Executive
Officer of Schostak Brothers & Company, Inc.,
a full service real estate company in Southfield,
Michigan; Director of Crowley Milner & Company,
a retail department store chain in Detroit, Michigan
Mark Shaevsky Partner in Honigman Miller Schwartz and Cohn, a 62 1985
law firm headquartered in Detroit,
Michigan
Continuing Directors Whose Terms End in 2000
Phillip Wm. Fisher Chairman of the Board of Directors of Durakon 46 1997
Industries, an automotive parts supplier in
Lapeer, Michigan; Principal of the Fisher Group,
an investment management firm in Detroit,
Michigan; Partner in the Chase Company, a
residential real estate development firm in
Bloomfield Hills, Michigan; and General Partner
in Edcor Data Services, a data services firm in
Farmington Hills, Michigan
Mark D. Grossi Executive Vice President of the Corporation; and 44 1995
Director of Pacific Gateway Properties, a real
estate company in San Francisco, California
John D. Koch (1) Executive Vice President of the Corporation 45 1995
Philip J. Meathe Retired Chairman of the Board and Chief 71 1976
Executive Officer of Smith, Hinchman & Grylls
Associates, Inc., an architectural engineering
and planning firm in Detroit, Michigan
Michael P. Morley Senior Vice President and Director of 54 1995
Human Resources of Eastman Kodak Company
of Rochester, New York
John P. Tierney Retired Chairman and Chief Executive Officer of 66 1996
Chrysler Financial Corporation; Director of
ContiFinancial Corporation, a consumer and
commercial finance company located in New York,
New York; and Director of Dollar Thrifty
Automotive Group, a car rental company
headquartered in Tulsa, Oklahoma
Continuing Directors Whose Terms End in 1999
Charles M. Heidel Retired President and Chief Operating Officer of 72 1980
The Detroit Edison Company, a public utility in
Detroit, Michigan
Charles F. Ipavec General counsel to the Bank; President, LaPorte 76 1972
and Ipavec Co., L.P.A., a law firm in Cleveland,
Ohio
Richard W. Neu Executive Vice President and Chief Financial 41 1992
Officer of the Corporation; Treasurer of FirstFed
prior to the FirstFed Merger
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION First Became
NAME OR EMPLOYMENT Age a Director
---- ------------- --- ----------
<S> <C> <C> <C>
Victor A. Ptak General partner, manager of J.C. Bradford & Co., 65 1989
L.P.A., an investment banking firm in Cleveland,
Ohio
Melvin J. Rachal President and Chief Operating Officer, Midwest 48 1998
Stamping, Inc., an automotive supplier in Bowling
Green, Ohio, from 1995 to present. From 1991 to
1995 was Vice President of TRW/Koyo Seiko
Steering Company, Inc., an automotive supplier in
Knoxville, Tennessee
Leonard S. Simon Vice Chairman of the Corporation since the RCSB 60 1984
Merger; served as Chairman of the Board and Chief
Executive Officer of RCSB and Rochester Bank prior
to the RCSB Merger
Eresteen R. Williams Retired Medical Office Manager for D.G. Williams, 72 1979
Jr., M.D., P.C., a medical practice in Detroit,
Michigan
</TABLE>
- ---------------------------------
(1) Messrs. Charles John Koch and John D. Koch are brothers.
CORPORATE GOVERNANCE AND OTHER MATTERS
The Board of Directors of the Corporation acts as a nominating committee
for selecting nominees for election as directors. Although the Board will
consider nominees recommended by shareholders, it has not established any
procedures for this purpose. A condition of the RCSB Merger stipulates that
Leonard S. Simon will serve as a Vice Chairman of the Corporation's Board of
Directors until Charter One's annual meeting of shareholders held in the year
2000. An additional condition added four RCSB directors to the Charter One
Board, subject to shareholders approving the amendment to the Corporation's
certificate of incorporation. Such approval was received and the size of the
Board was increased to 20 directors. Furthermore, the Bylaws require (which was
a condition to the FirstFed Merger) that at all times prior to October 31, 1999,
the 16 member board of directors which resulted from the FirstFed Merger consist
of an equal number of pre-FirstFed Merger directors of Charter One ("Charter One
Initial Directors") and FirstFed ("FirstFed Initial Directors"), respectively
(collectively, the "Initial Directors"). Any vacancy with respect to such
Initial Directors shall be filled based on the recommendation of (i) the Charter
One Initial Directors (or any successors to such directors), in the case of a
departing Charter One Initial Director (or successor thereto) and (ii) the
FirstFed Initial Directors (or any successors to such directors), in the case of
a departing FirstFed Initial Director (or successor thereto). An additional
condition of the FirstFed Merger stipulates that until October 31, 1999 Charles
John Koch and Jerome L. Schostak will serve as Chairman and as a Vice Chairman,
respectively, of the Corporation's Board of Directors.
The Board of Directors of the Corporation has an Audit Committee which
recommends independent auditors to the Board, reviews the scope and results of
the auditors' services, reviews with management and the independent auditors the
systems of internal control and audit and ensures that the books and records of
the Corporation are kept in accordance with generally accepted accounting
principles. The members of the Audit Committee currently are Philip J. Meathe
(Chairman), Eugene B. Carroll, Sr., Charles F. Ipavec, John P. Tierney, Mark
Shaevsky and Eresteen R. Williams. In 1997, the Audit Committee met seven times.
The Board of Directors of the Corporation has a Stock Option Committee
and the Bank has a standing Compensation Committee which together act as the
compensation committee of the Corporation and the Bank. These committees
establish the compensation of the Boards of Directors, establish the
compensation of senior officers and consider the granting of stock options and
other employee compensation matters. The members of the committees, which are
identical for the Corporation and the Bank, currently are Eugene B. Carroll, Sr.
(Chairman), Denise M. Fugo, Charles M. Heidel, Michael P. Morley, Henry R.
Nolte, Jr., Victor A. Ptak and Jerome L. Schostak. The committees each met eight
times in 1997.
6
<PAGE> 9
In 1997, Charter One held 13 meetings of the Board of Directors. No
incumbent director attended fewer than 75% of the aggregate of the total number
of meetings held by the Board of Directors and the total number of meetings held
by all committees of the Board on which he or she served during the period that
he or she served.
COMPENSATION OF DIRECTORS
The Boards of Directors of the Corporation, Charter Michigan and the
Bank have identical membership. Executive officers of the Corporation, Charter
Michigan or the Bank do not receive fees for their service as directors of such
entities or for service on any committee of the Boards of Directors. Each
non-employee member of the Boards of Directors of the Corporation and Charter
Michigan receives a monthly retainer of $325 from each company. Additionally,
each non-employee member of the Bank's Board of Directors receives $1,200 per
month plus $1,100 for each Board meeting attended by the director. Members of
the committees of the Bank's Board also receive $300 per month for each
committee on which they sit, except for the chairman of the Compensation and
Audit Committees, who receive $600 per month. In addition to other fees, Jerome
L. Schostak receives $11,960 per month for services rendered as a Vice Chairman
of the Board of Directors. Leonard S. Simon, who serves as a Vice Chairman of
the Board of Directors in addition to being an employee of the Corporation,
receives $37,917 per month pursuant to an employment agreement which provides
for, among other things, a four-year term (which commenced on October 3, 1997,
the effective date of the RCSB Merger) and certain benefits as are applicable to
executive officers of the Corporation. Mr. Simon, however, is not entitled to
participate in any incentive bonus program offered by the Corporation or any
stock or stock option plan of the Corporation, except in his capacity as a
non-employee director. Furthermore, in the event that a change in control of the
Corporation occurs and Charles John Koch will not serve as the Chief Executive
Officer of the Corporation or its successor immediately following such change in
control, Mr. Simon will have the right to discontinue rendering services to the
Corporation under his employment agreement and (i) to receive a lump sum payment
equal to the aggregate amount of his salary that otherwise would be payable
under his agreement if he had continued to render services during the remaining
term and (ii) to continue during the remainder of the term of his agreement to
receive certain benefits set forth under his agreement.
Through April 1997, the Corporation had a directors' stock option plan
(the "Directors' Plan") which was administered by the Corporation's Board of
Directors and provided for a one-time grant of 4,961 stock options to
non-employee directors upon joining the Board. With the approval of the Charter
One Financial, Inc. 1997 Stock Option and Incentive Plan (the "1997 Stock Option
Plan") at the 1997 annual meeting of shareholders, any shares reserved for
awards but ungranted under the Directors' Plan were cancelled and non-employee
directors became eligible for awards under the 1997 Stock Option Plan, which
provides for a maximum grant of options of 5,000 shares per director per year.
In 1997, four non-employee directors received grants. On June 18, 1997, Phillip
Wm. Fisher was granted an option to purchase 4,961 shares of Common Stock at an
exercise price of $47.142 per share. On October 15, 1997, three former RCSB
directors (Michael P. Morley, Ronald F. Poe and John P. Tierney) were each
granted an option to purchase 4,987 shares of Common Stock at an exercise price
of $59.75 per share. The options are 10-year options and vest one-third on each
of the first three anniversaries of the grant date. In 1997, no non-employee
director exercised options except for Eugene B. Carroll, Sr. who exercised a
stock option for 9,923 shares for net a value realized (market value less
exercise price) of $482,219.
Eugene B. Carroll, Sr., a director of the Corporation and chairman of
the Compensation Committee, is President and Chief Executive Officer of Employer
Sponsored Plans, Inc. ("ESP, Inc.") which provides services for the
Corporation's group life insurance policy. Mr. Carroll is also President and
Chief Executive Officer of Eugene B. Carroll, CLU, Inc. ("E.B.C., Inc.") which
provides, on an agency basis, group life insurance benefits for the Corporation.
During 1997, ESP, Inc. and/or E.B.C., Inc. received from the Corporation fees
and commissions in the amount of $33,000 for services rendered to the
Corporation. Charles F. Ipavec, a director of the Corporation and general
counsel to the Bank, is President of the law firm of LaPorte and Ipavec Co.,
L.P.A. ("LaPorte and Ipavec"). During 1997, LaPorte and Ipavec received from the
Corporation fees in the amount of $106,080 for services rendered to the
Corporation.
Jerome L. Schostak, a director and a Vice Chairman of the Board and
member of the Compensation Committee, is Chairman and Chief Executive Officer of
Schostak Brothers & Company, Inc. which has provided lease management and real
estate brokerage services for the Corporation. Mark Shaevsky, a director of the
Corporation, is a partner of the law firm of Honigman Miller Schwartz and Cohn.
The firm has been retained from time to time to provide legal services to the
Bank regarding real estate issues. Denise M. Fugo, a director of the
Corporation, is president of City Life Inc. which is a banquet and catering
company that has provided services to the Corporation.
7
<PAGE> 10
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table includes individual compensation
information on the Chief Executive Officer and the four other most highly paid
executive officers, for services rendered in all capacities during the fiscal
years ended December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ---------------------- ----------
SECURITIES
OTHER UNDER- ALL
ANNUAL RESTRICTED LYING LTIP OTHER
COMPEN- STOCK OPTIONS/ PAYOUTS COMPEN-
NAME AND SALARY(1) BONUS(2) SATION(3) AWARD(S) SARS (4) SATION(5)
PRINCIPAL POSITION YEAR ($) ($) ($) ($) (#) ($) ($)
- ------------------------- ------ ---------- --------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles John Koch 1997 469,122 339,351 - - 54,600 - 16,256
Chief Executive 1996 398,907 366,208 - - 176,400 - 15,297
Officer 1995 338,657 238,696 - - - - 45,501
John D. Koch 1997 309,441 191,086 - - 33,600 - 14,043
Executive Vice 1996 270,216 213,781 - - 110,250 - 14,601
President 1995 229,103 133,775 - - - - 28,827
Richard W. Neu (6) 1997 301,291 186,965 - - 33,600 - 7,089
Executive Vice 1996 267,752 212,362 - - 110,250 - 6,658
President and 1995 240,000 159,657 32,331 - - 139,906 -
Chief Financial
Officer
Mark D. Grossi 1997 282,557 174,335 - - 33,600 - 12,323
Executive Vice 1996 238,048 201,531 - - 110,250 - 13,814
President 1995 190,201 115,522 - - - - 16,323
Robert J. Vana 1997 163,061 91,748 - - 15,750 - 12,962
Chief Corporate 1996 145,251 113,491 - - 49,613 - 12,081
Counsel and 1995 122,193 69,190 - - - - 19,603
Secretary
</TABLE>
- ----------------------------------
(1) Salary includes amounts deferred at the election of the executive officer
through the Bank's 401(k) Plan.
(2) Includes annual award under the Executive Incentive Goal Achievement Plan
and, in the case of Mr. Neu, payments under First Federal's Profit Sharing
Plan and Management Incentive Award Plan ("MIAP"). Both First Federal plans
were terminated upon the FirstFed Merger.
(3) Represents Mr. Neu's relocation expenses grossed up for taxes.
(4) Includes payment of appreciation on 1992 and 1993 Long-Term MIAP awards
which were distributed in conjunction with the termination of First
Federal's MIAP.
(5) Includes the Bank's contributions to the 401(k) Plan and ESOP, and life
insurance premium payments. Amounts paid to Messrs. C. Koch, J. Koch, Neu,
Grossi and Vana for 1997 are as follows: 401(k), $5,072, $5,656, $5,507,
$5,535, and $5,750; ESOP, $5,250, $5,250, $-0-, $5,250, and $5,250; life
insurance premium payments, $5,934, $3,136, $1,582, $1,539, $1,962,
respectively.
(6) Mr. Neu's individual compensation information includes his compensation from
First Federal in 1995, prior to the FirstFed Merger.
8
<PAGE> 11
STOCK OPTIONS GRANTED IN 1997
The following table sets forth information concerning stock
options granted under the Corporation's Long-Term Incentive Plan (the "1988
Stock Option Plan") to the Corporation's Chief Executive Officer and the four
most highly compensated executive officers in 1997. The 1997 grants, which vest
100% on January 22, 2000, have an exercise price equal to the closing price of
the Common Stock on the grant date. No stock appreciation rights ("SARs") were
granted during 1997.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS EXERCISE ASSUMED ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION FOR OPTION TERM (1)
OPTIONS EMPLOYEES PER EXPIRATION --------------------------------
NAME GRANTED IN 1997 SHARE DATE 5% 10%
---- ------- ------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Charles John Koch 54,600 7.97% $42.142 1/22/07 $1,447,058 $3,667,127
John D. Koch 33,600 4.91 42.142 1/22/07 890,497 2,256,693
Richard W. Neu 33,600 4.91 42.142 1/22/07 890,497 2,256,693
Mark D. Grossi 33,600 4.91 42.142 1/22/07 890,497 2,256,693
Robert J. Vana 15,750 2.30 42.142 1/22/07 417,420 1,057,825
</TABLE>
- -------------------------
(1) A 5% and 10% annually compounded increase in the Corporation's stock price
from the date of grant to the end of the 10-year option term would result in
stock prices of $68.6449 and $109.3055, respectively.
OPTION/SAR EXERCISES IN 1997 AND YEAR-END HOLDINGS
The following table sets forth information regarding options exercised
by the Chief Executive Officer and the other named executive officers during
1997 and options and SARs held by such persons at the end of 1997. No SARs were
exercised by the named executive officers during 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT FY-END Options/SARS AT FY-END
ACQUIRED VALUE
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
------- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles John Koch 122,772 5,530,378 154,476(2)/ 172,200 5,813,743 / 5,395,971
John D. Koch 30,100 1,378,991 97,827(3)/ 107,100 3,872,843 / 3,361,466
Richard W. Neu 1,499 58,894 253,040 / 107,103 12,846,048 / 3,361,574
Mark D. Grossi - - 79,042 / 107,100 3,213,317 / 3,361,466
Robert J. Vana - - 48,992(4)/ 48,826 1,846,153 / 1,525,915
</TABLE>
(1) The value of the options at fiscal year end was determined by subtracting
the exercise price from the market value of the underlying securities on
December 31, 1997, which was $63.125 per share, and multiplying the same by
the number of options. The value of each SAR at fiscal year end (determined
in accordance with the terms of the 1988 Stock Option Plan which provides
that the value of the SARs will appreciate at a maximum level of $1.209 per
year from date of grant) was $12.09.
(2) Amount reported includes 31,008 SARs.
(3) Amount reported includes 15,504 SARs.
(4) Amount reported includes 9,303 SARs.
9
<PAGE> 12
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Corporation's Supplemental Executive Retirement Plan ("SERP")
covers Charles John Koch, John D. Koch, Richard W. Neu, Mark D. Grossi and
Robert J. Vana. The SERP is a nonqualified salary continuation program designed
to provide monthly benefits upon retirement. The amount of benefits is a
function of years of service and the highest three years of total compensation.
Annual benefits under the SERP are capped at $400,000 for Charles John Koch and
John D. Koch, and at $250,000 for Messrs. Neu, Grossi and Vana. As of December
31, 1997, the monthly benefits that would be paid under the SERP at normal
retirement age would be $22,503, $6,494, $5,033, $3,434, and $3,450 for Charles
John Koch, John D. Koch, Richard W. Neu, Mark D. Grossi and Robert J. Vana,
respectively.
EMPLOYMENT AGREEMENTS
Effective October 31, 1995, the Corporation entered into employment
agreements (the "Agreements") with Charles John Koch, John D. Koch, Richard W.
Neu, Mark D. Grossi and Robert J. Vana. The Agreements provide for an initial
term of five years, with one-year extensions of the term annually on October 31
beginning in 1998, unless the officer receives notice that such term will not be
extended and receives an unsatisfactory performance review from the
Corporation's or the Bank's Board of Directors.
The Agreements provide for an annual base salary in an amount not less
than the executive's base salary as of October 31, 1995, subject to reduction
for amounts paid to the executive by any Corporation subsidiary. The Agreements
also entitle each executive to participate in an equitable manner with all other
executive officers in such performance-based and discretionary bonuses, if any,
as are authorized and declared by the Corporation's or the Bank's Board of
Directors, and in the Bank's employee benefit, fringe benefit and welfare plans
and programs.
In the event an executive experiences an involuntary termination of
employment during the term of his Agreement, and the executive has offered to
continue to provide services as contemplated by his Agreement, the Agreement
obligates the Bank to pay the executive, during the lesser period of the
remaining term of the Agreement or three years following the date of
termination, monthly payments equal to one-twelfth of his annual base salary in
effect immediately prior to the date of termination and one-twelfth of the
average annual amount of cash bonus and cash incentive compensation of the
executive for the two full fiscal years preceding the date of termination. The
payments as described above will be reduced by any cash compensation actually
paid to the executive by Charter One's subsidiaries during the three-year period
following termination, as well as amounts received by the executive for services
other than to Charter One or Charter One's subsidiaries during the unexpired
term of his Agreement or the three-year period following termination.
In the event an executive experiences an involuntary termination of
employment within 12 months preceding or 24 months following a "change in
control" (as defined in the Agreements), the Agreements require the Corporation,
in addition to its other payment obligations under the Agreements, to make a
lump sum payment to the executive in an amount equal to up to 299% of the
executive's "base amount" as determined under Section 280G of the Internal
Revenue Code. Based on current salaries, if Charles John Koch, John D. Koch,
Richard W. Neu, Mark D. Grossi or Robert J. Vana had terminated their employment
as of February 27, 1998 under circumstances entitling them to severance pay as
described above, they would have been entitled to receive lump sum cash payments
of $4,155,757, $2,025,670, $1,104,337, $1,006,922 and $816,558, respectively.
1997 COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Charter One is a unitary savings and loan holding company which, through
a subsidiary (Charter Michigan), owns all of the outstanding capital stock of
the Bank. The Corporation's business has consisted primarily of the business of
the Bank and its subsidiaries. The financial results of the Corporation are a
direct function of the Bank's achievement of its goals as set forth in its
annual business plan. Executives are compensated for their contribution to the
achievement of these goals which benefit the shareholders, customers, employees
and the communities in which the Bank operates.
The Corporation's Stock Option Committee and the Bank's Compensation
Committee (together the "Compensation Committee" or the "Committee") are
identical and are composed exclusively of outside directors. The Committee is
dedicated to the philosophy of linking executive pay to achievement of the
Bank's goals and the resulting performance of the Corporation. The Committee
reviews all issues pertaining to executive compensation and submits its
recommendations to the full Board of Directors for approval.
10
<PAGE> 13
EXECUTIVE COMPENSATION PHILOSOPHY
The Executive Compensation Program ("Program") is designed to guide the
Compensation Committee in formulating an appropriate compensation structure for
senior management. Its overall objective is to align senior management
compensation with the goals of the Bank's annual business plan by creating
strong incentives to manage the business successfully from both a financial and
operating perspective. The Program, which is administered by the Committee, is
structured to accomplish the following specific objectives:
1) Maintain a program which:
a) clearly motivates personnel to perform and succeed according
to the goals outlined in the Bank's annual business plan;
b) retains key personnel critical to the long-term success of the
Bank; and
c) emphasizes formula-based components, such as incentive plans, in
order to better focus management efforts in its execution of the
Bank's annual business plan.
2) Maintain pay for performance as an integral component of the Program
by utilizing incentive plans that emphasize corporate success;
3) Continue to incorporate compensation elements such as stock options
which clearly align the interests of management with those of the
shareholders;
4) Maintain a corporate environment which encourages stability and a
long-term focus for both the Bank and its management; and
5) Ensure that management:
a) fulfills its overall responsibility to its constituents,
including shareholders, customers, employees, the community
and government regulatory agencies;
b) conforms its business conduct to the highest ethical standards;
c) remains free from any influences that could impair or appear to
impair the objectivity and impartiality of its judgments or
treatment of the Bank's constituents; and
d) continues to avoid any conflict between its responsibilities to
the Bank and each member's personal interests.
Achievement of these objectives should result in a compensation
structure that reasonably tracks the total performance of the Bank. The
Program's compensation elements include base salary as well as incentive plans.
The incentive plans have been designed to reflect corporate performance,
individual performance, and alignment with the interests of the Corporation's
shareholders.
The Committee relies upon survey market research to determine and
maintain a relevant peer group (the "peer group") for total corporate
performance, for base salary comparison and for incentive compensation
comparison. The peer group is national in scope representing 21 publicly traded
commercial banks and savings institutions of comparable size to the Bank. The
Committee believes the peer group is representative of the Corporation's
competitors for business, personnel recruitment and compensation. The peer group
survey analyzes total corporate performance and the relationship between
performance, base pay and incentive compensation. Performance comparisons
include rankings based on return on average equity, return on average assets,
efficiency ratio and total return on the company's stock price, among other
factors. Compensation data utilized for comparisons is generally annual cash
compensation including base salary and most forms of cash bonus and annual
incentive awards.
11
<PAGE> 14
BASE SALARY
Base salary forms the foundation of the Bank's compensation program as
it represents income not at risk. The Committee believes that base salary should
function as an anchor: large enough that the executive is comfortable remaining
in the Bank's employ, but not so large as to conflict with the executive's
motivation to work hard to increase shareholder value. An individual's base
salary is directly related to his or her position scope, job responsibilities,
accountabilities, performance and contribution to the Bank. In general, the base
salary of each executive officer is intentionally set below the median of the
peer group. However, superior corporate or individual performance should result
in incentive compensation which, when combined with base salary and long-term
incentives, would place overall compensation above that of the peer group
median.
INCENTIVE PLANS
Executive Incentive Goal Achievement Plan (the "EIGAP"). The purpose of
the Bank's EIGAP is to achieve the following objectives:
1) promote stability and the achievement of the Bank's profitability
and business goals;
2) link executive compensation to specific Bank objectives and
individual goals;
3) provide a competitive reward structure for senior officers and other
key employees; and
4) encourage involvement and communication regarding the Bank's
strategic plans.
Eligibility is normally limited to those management positions where the
functional responsibility encompasses the establishment of the Bank's strategic
direction and long-range plans, or operating results at the divisional level.
Other selected employees may also be eligible to participate as defined by
competitive compensation practices within the Bank's labor market.
All awards are established as a percentage of each participant's base
salary. Award levels differ due to the varying amount of impact on the Bank's
success. Participants earn awards by personally achieving their individual goals
and assisting the Bank in achieving its overall objectives. Awards are weighted
between Bank objectives and individual goals and vary by participant level. The
more control and influence a participant has on either Bank objectives or
individual goals, the greater the participant's weighting on that particular
factor. Individual goals and Bank objectives are established at the beginning of
each year. Bank objectives are established by the Chief Executive Officer and
the Committee. All measures under the EIGAP remain in effect for the entire
year.
Should individual performance and goal achievement meet expectations but
the Bank fails to achieve certain of its objectives, no incentive award will be
made to any participant. Additionally, if the Bank achieves all of its
objectives but a participant's performance and/or goal achievement fails to meet
expectations, no incentive award will be made to that participant.
Stock Options. At least annually, the Committee reviews the
appropriateness of granting stock options of the Corporation to senior
management. The purposes of this long-term element of the Program are to:
1) provide an incentive to key employees to promote the success of the
business;
2) provide key officers with a long-term incentive to increase
shareholder value;
3) encourage ownership rights through purchase of Common Stock of the
Corporation; and
4) attract and retain the best available personnel.
In the past, the Committee has been careful to grant options based on an
individual's performance and impact on the Bank's financial results. All options
granted to date have a term of 10 years and have contained vesting requirements
(usually three years). This element of the Program is designed to align the
interests of the executive with corporate and shareholder objectives.
12
<PAGE> 15
The 1997 Stock Option Plan initially provided for a maximum number of
shares with respect to which awards may be made of 4,586,739. As a result of
merger and stock dividend activity during the year, the maximum number of shares
was increased to 6,321,058 pursuant to the adjustment provision under the 1997
Stock Option Plan.
Federal Income Tax Limitations. Commencing with the Corporation's tax
year beginning January 1, 1994, Section 162(m) of the Internal Revenue Code
generally limits to $1 million the Corporation's federal income tax deduction
for compensation paid in any year to its Chief Executive Officer and each of its
four highest paid executive officers, to the extent that such compensation is
not "performance-based compensation", within the meaning of Section 162(m). In
structuring the Corporation's compensation arrangements with its highest paid
executive officers, the Committee provides incentive formulas that qualify as
"performance-based compensation" under Section 162(m) in order to decrease the
after-tax cost of such arrangements to the Corporation.
CORPORATE PERFORMANCE AND EXECUTIVE PAY
Base Salary for 1997. Over 40% of the potential compensation of Charles
John Koch (the "CEO") is based upon the EIGAP and, therefore, is dependent upon
specific Corporation achievements in any given year. The balance of the CEO's
annual compensation is primarily his base salary which is established by the
Committee after consideration of his current performance, his past base salary,
comparison of the base salaries within the peer group, and the overall
performance and economic condition of the Corporation. On April 1, 1997, the
Board of Directors, acting on the recommendation of the Committee, increased the
CEO's salary by 15.4%. The increase in base salary was the result of the CEO's
outstanding efforts, evidenced in particular by the achievement of record net
income during 1996, the continued quality of the Bank's financial statements,
the growth in earnings, the successful implementation of the FirstFed Merger,
the subsequent acquisition of the First Nationwide branch franchise in Michigan,
and continued compliance with governmental regulations. In comparing the CEO's
base salary to the peer group, the Committee found that it fell below the median
base salary for the peer group. Base salary for the CEO is targeted to fall
below the median of the peer group because of the Corporation's emphasis on
incentive compensation for its executives. Additionally, the Committee compares
the total compensation package of executive officers to the peer group to ensure
that the total package is competitive with the marketplace. All executive
officers were also granted salary increases effective April 1, 1997, based on
the Committee's assessment of the individual's leadership, technical knowledge,
analytical ability, decision making, planning, personnel development and
communication effectiveness and its objective review of the individual
executive's goal achievement for the performance period in areas such as: loan
production, investment return, branch operating efficiency, merger and
acquisition integration, and deposit retention.
Incentive Awards for 1997. The EIGAP for 1997 provided for the cash
bonus awarded to the CEO recognizing his contribution to the achievement of the
Bank's annual goals. The Committee reviewed the Bank's performance relative to
the percentage achievement of the goals established in the 1997 Business Plan,
which focused on core earnings, net worth, asset quality, efficiency ratio, loan
origination, deposit growth, and interest rate risk. The Bank exceeded the
financial and operational goals it set for 1997 and Mr. Koch exceeded his
individual performance goals, which resulted in a bonus to the CEO at the
maximum level under the EIGAP. The goals established in the Bank's annual
business plan are designed such that if achieved, the Corporation's earnings
should increase while maintaining the institution's historical financial
soundness. All executive officers were also awarded cash bonuses which were
functions of the achievement of the Corporation's aforementioned goals, in
conjunction with the achievement of related individual goals.
In addition to cash bonus awards, the Board of Directors, acting on the
recommendation of the Committee, granted a total of 684,777 stock options in
1997. Of the total, 54,600, or 7.97%, were granted to the CEO in recognition of
his individual performance and impact on the Bank's financial results.
Submitted by the Compensation Committee
Eugene B. Carroll, Sr. (Chairman)
Denise M. Fugo
Charles M. Heidel
Michael P. Morley
Henry R. Nolte, Jr.
Victor A. Ptak
Jerome L. Schostak
13
<PAGE> 16
COMPARATIVE PERFORMANCE BY THE CORPORATION
The following chart compares the cumulative total returns of the
Corporation, the S&P 500 Index, the KBW 50 Total Return Index ("KBW 50"), and a
weighted index of a selected peer group which includes all publicly traded
thrifts and six selected banks with an asset size greater than $5 billion and
less than $22 billion as of September 30, 1996 (the "Peer Group"). The KBW 50
(published by Keefe Bruyette & Woods) is being substituted this year for the
Peer Group that has been used in past proxy statements because seven of the 24
companies included in the Peer Group last year have been or are in the process
of being acquired (CalFed Bancorp, Inc., Coast Savings Financial, Inc.,
Collective Bancorp, Inc., First Financial Corporation, ONBANCorp, Inc.,
Roosevelt Financial Group, Inc., and Standard Federal Bancorporation, Inc.). As
a result of the level of consolidation activity, combined with the Corporation's
increased asset size following the RCSB Merger, the Peer Group no longer
represents an appropriate index against which to measure the Corporations's
performance and is included here solely for comparison purposes. The chart
assumes an investment of $100 on January 1, 1993 and dividend reinvestment
throughout the period.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHARTER ONE FINANCIAL, INC., S&P 500 INDEX,
KBW 50 INDEX AND PEER GROUP INDEX
[Graph]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CHARTER ONE 100 100.63 99.64 165.88 244.53 393.48
- -------------------------------------------------------------------------------------------
S&P 500 100 110.08 111.54 153.45 188.69 251.04
- -------------------------------------------------------------------------------------------
KBW 50(1) 100 105.54 100.16 100.41 226.92 331.73
- -------------------------------------------------------------------------------------------
PEER GROUP(2) 100 100.29 102.66 160.57 228.36 394.17
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------
(1) The KBW 50 is a market-capitalization-weighted bank stock index published by
Keefe Bruyette & Woods that includes all money-center banks and most
regional bank holding companies. Although the Corporation is not included in
the KBW 50, the index provides a reliable measurement of industry
performance.
(2) The Peer Group consists of the following companies: Astoria Financial
Corporation, Charter One Financial, Inc., Commercial Federal Corporation,
Dime Bancorp, Incorporated, Fifth Third Bancorp, FirstMerit Corporation,
Golden State Bancorp, Inc., GreenPoint Financial Corporation, Long Island
Bancorp, Inc., Old Kent Financial Corporation, Peoples Bank, MHC, Provident
Bancorp, Inc., Sovereign Bancorp, Inc., Star Banc Corporation, TCF Financial
Corp., Washington Federal, Inc., and Washington Mutual, Inc.
TRANSACTIONS WITH RELATED PARTIES
Historically, the Bank provided residential mortgage loans to directors,
officers and other employees at reduced interest rates and without loan fees.
Loans to directors, executive officers and employees, and their immediate
families, are made in the ordinary course of business on substantially the same
terms as those prevailing at the time for comparable transactions with other
persons, except for reduced interest rates and fees. These loans, when made,
have not involved more than the normal risk of uncollectibility or presented
other unfavorable features. No director or executive officer of the Corporation
or the Bank had a loan with preferential terms and an outstanding aggregate
balance exceeding $60,000 at any time since January 1, 1997 except Charles John
Koch. Mr. Koch was the borrower on an adjustable-rate residential loan,
originated pursuant to the Bank's lending policy in 1984, which provided for a
rate .83%
14
<PAGE> 17
below current market. The loan, which was repaid in full during 1997, had a
maximum outstanding principal balance of $152,640 and an interest rate of 6.44%
during the year.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Corporation's
independent auditors for the fiscal year ending December 31, 1997.
Representatives of Deloitte & Touche LLP will be present at the Annual Meeting.
They will be given an opportunity to make a statement if they desire to do so
and will be available to respond to appropriate questions.
The Board of Directors has appointed the firm of Deloitte & Touche LLP
to continue as independent auditors for the Corporation for the fiscal year
ending December 31, 1998, subject to ratification of such appointment by the
shareholders. Unless otherwise indicated, properly executed proxies will be
voted in favor of ratifying the appointment of Deloitte & Touche LLP,
independent certified public accountants, to audit the books and accounts of the
Corporation for the fiscal year ending December 31, 1998. This proposal requires
the affirmative vote of a majority of the votes actually cast at the Annual
Meeting. Abstentions will have the effect of a negative vote, while broker
nonvotes will have no effect on this proposal.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
10% of the Corporation's Common Stock (or any other equity securities, of which
there is none), to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of the
Corporation's Common Stock. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file.
To the Corporation's knowledge, based solely on a review of the copies
of such reports furnished to the Corporation and written representations that no
other reports were required during the fiscal year ended December 31, 1997, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% beneficial owners were complied with except that Mr. Simon
inadvertently failed to file a Form 4 to report the exercise of stock options on
December 29, 1997 to acquire 6,500 shares of Common Stock. The options were
exercised with the intent to hold the shares acquired. On February 13, 1998, he
filed a Form 5 disclosing the exercise as soon as the oversight was discovered.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of
Charter One does not know of any other matters to be presented for action by the
shareholders at the Annual Meeting. If, however, any other matters not now known
is properly brought before the meeting, the persons named in the accompanying
proxy will vote such proxy in accordance with the determination of a majority of
the Board of Directors.
Any proposal intended to be presented by any shareholder for action at
the 1999 Annual Meeting of Shareholders of the Corporation must be received by
the Secretary of the Corporation at 1215 Superior Avenue, Cleveland, Ohio 44114,
not later than November 25, 1998, in order for the proposal to be considered for
inclusion in the proxy statement and proxy relating to the 1999 Annual Meeting.
Nothing in this paragraph shall be deemed to require the Corporation to include
in its proxy statement and proxy relating to the 1999 Annual Meeting any
shareholder proposal which does not meet all the requirements for inclusion
established by the SEC at the time such proposal is received.
<PAGE> 18
DETACH HERE
PROXY
CHARTER ONE FINANCIAL, INC.
ANNUAL MEETING, APRIL 22, 1998
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Charles John Koch and Jerome L. Schostak, and
each of them, proxies with power of substitution to vote on behalf of the
shareholders of Charter One Financial, Inc. on April 22, 1998, and any
adjournments thereof, with all powers that the undersigned would possess if
personally present with respect to the following:
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE
HEREOF, BUT IF NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR APPROVAL OF PROPOSAL NO. 2. THE PROXIES MAY VOTE
IN THEIR DISCRETION AS TO OTHER MATTERS WHICH MAY COME BEFORE THE MEETING.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM CHARTER ONE FINANCIAL, INC. PRIOR TO
THE EXECUTION OF THIS PROXY, OF NOTICE OF THE MEETING AND A PROXY STATEMENT
DATED MARCH 25, 1998.
| SEE REVERSE |
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) | SIDE |
<PAGE> 19
[X] Please mark
votes as in
this example.
<TABLE>
<CAPTION>
1. Election of Directors
<S> <C> <C>
NOMINEES: Eugene B. Carroll, Sr., Denise M. Fugo, INSTRUCTIONS: To vote for all nominees mark the
Charles John Koch, Henry R. Nolte, Jr., box "FOR" with an "X", to withhold your vote for all
Ronald F. Poe, Jerome L. Schostak, nominees mark the box "WITHHOLD" with an "X".
Mark Shaevsky To withhold your vote for an individual nominee, mark
the box "FOR ALL EXCEPT" with an "X" and write the name
of the nominee on the line provided at left for whom
you wish to withhold your vote.
</TABLE>
FOR WITHHELD
[ ] [ ]
FOR
ALL
EXCEPT
[ ] ------------------------------------------------
FOR AGAINST ABSTAIN
2. Voting on selection of Deloitte & [ ] [ ] [ ]
Touche LLP as Independent
Auditors of the Company.
In their discretion, the proxies are authorized to vote on any other business as
may properly come before the meeting and any adjournments thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
A majority of the proxies or substitutes present at the meeting may
exercise all powers granted hereby.
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc. If applicable, a corporation should sign in its
name by the president or other authorized officers. All co-owners must
sign.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature:___________________ Date:____________ Signature:____________________ Date:____________
</TABLE>
<PAGE> 20
DETACH HERE
PROXY
CHARTER ONE FINANCIAL, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CHARTER ONE FINANCIAL, INC. FOR THE
As a participant in the Haverfield Corporation Employee Stock Ownership Plan
(the "Plan"), I hereby direct the trustee of the Plan in which I participate to
vote all vested shares allocated to my account under such Plan as of February
27, 1998 in accordance with the instructions on the reverse side of this proxy
card or, if no instructions are given, in accordance with the Board of Directors
recommendations, on all items of business to come before the Annual Meeting of
Shareholders to be held on April 22, 1998 or any adjournment thereof. I
understand my vote shall be confidential and will be seen only by BankBoston,
N.A. in the tabulation of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL NO. 2.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM CHARTER ONE FINANCIAL, INC. PRIOR TO
THE EXECUTION OF THIS PROXY, OF NOTICE OF THE MEETING AND A PROXY STATEMENT
DATED MARCH 25, 1998.
| SEE REVERSE |
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) | SIDE |
<PAGE> 21
[X]Please mark
votes as in
this example.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors
NOMINEES: Eugene B. Carroll, Sr., Denise M. Fugo, INSTRUCTIONS: To vote for all nominees mark the
Charles John Koch, Henry R. Nolte, Jr., box "FOR" with an "X", to withhold your vote for all
Ronald F. Poe, Jerome L. Schostak, nominees mark the box "WITHHOLD" with an "X".
Mark Shaevsky To withhold your vote for an individual nominee, mark
the box "FOR ALL EXCEPT" with an "X" and write the name
of the nominee on the line provided at left for whom
you wish to withhold your vote.
</TABLE>
FOR WITHHELD
[ ] [ ]
FOR
ALL
EXCEPT
[ ] ------------------------------------------------
FOR AGAINST ABSTAIN
2. Voting on selection of Deloitte & [ ] [ ] [ ]
Touche LLP as Independent
Auditors of the Company.
In their discretion, the proxies are authorized to vote on any other business as
may properly come before the meeting and any adjournments thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
A majority of the proxies or substitutes present at the meeting may
exercise all powers granted hereby.
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc. If applicable, a corporation should sign in its
name by the president or other authorized officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature:____________________ Date:____________ Signature:____________________ Date:____________
</TABLE>
<PAGE> 22
DETACH HERE
PROXY
CHARTER ONE FINANCIAL, INC.
1998 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CHARTER ONE FINANCIAL, INC. FOR THE
As a participant in the Charter One Bank Retirement Savings Plan (the "Plan"), I
hereby direct the trustee of the Plan in which I participate to vote all vested
shares allocated to my account under such Plan as of February 27, 1998 in
accordance with the instructions on the reverse side of this proxy card or, if
no instructions are given, in accordance with the Board of Directors
recommendations, on all items of business to come before the Annual Meeting of
Shareholders to be held on April 22, 1998 or any adjournment thereof. I
understand my vote shall be confidential and will be seen only by BankBoston,
N.A. in the tabulation of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL NO. 2.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT FROM CHARTER ONE FINANCIAL, INC. PRIOR TO
THE EXECUTION OF THIS PROXY, OF NOTICE OF THE MEETING AND A PROXY STATEMENT
DATED MARCH 25, 1998.
| SEE REVERSE |
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) | SIDE |
<PAGE> 23
[X]Please mark
votes as in
this example.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Election of Directors
NOMINEES: Eugene B. Carroll, Sr., Denise M. Fugo, INSTRUCTIONS: To vote for all nominees mark the
Charles John Koch, Henry R. Nolte, Jr., box "FOR" with an "X", to withhold your vote for all
Ronald F. Poe, Jerome L. Schostak, nominees mark the box "WITHHOLD" with an "X".
Mark Shaevsky To withhold your vote for an individual nominee, mark
the box "FOR ALL EXCEPT" with an "X" and write the name
of the nominee on the line provided at left for whom
you wish to withhold your vote.
</TABLE>
FOR WITHHELD
[ ] [ ]
FOR
ALL
EXCEPT
[ ] ------------------------------------------------
FOR AGAINST ABSTAIN
2. Voting on selection of Deloitte & [ ] [ ] [ ]
Touche LLP as Independent
Auditors of the Company.
In their discretion, the proxies are authorized to vote on any other business as
may properly come before the meeting and any adjournments thereof.
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
A majority of the proxies or substitutes present at the meeting may
exercise all powers granted hereby.
Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc. If applicable, a corporation should sign in its
name by the president or other authorized officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Signature:____________________ Date:____________ Signature:____________________ Date:____________
</TABLE>
