<PAGE> 1
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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 [X] 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>
CITIZENS BANCSHARES, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[CITIZENS BANCSHARES, INC. LOGO]
April 10, 1998
Dear Shareholders:
The Annual Meeting of Shareholders of Citizens Bancshares, Inc., will be
held in the Raymond J. Lowry Auditorium of the Fred H. Johnson Building, 10 East
Main Street, Salineville, Ohio, on Monday, May 11, 1998, at 7:00 p.m. I hope you
will be able to attend the Meeting.
The items proposed for action by the shareholders at the Meeting are the
election of directors, the approval of a Directors' Stock Retainer Plan and
approval of a Non-Statutory Stock Option Plan for Non-Employee Directors. In
addition, the officers will give current reports on the status of Bancshares and
its subsidiaries, The Citizens Banking Company and First National Bank of
Chester.
The nominees for election as directors are more fully described in the
enclosed Proxy Statement, which we encourage you to read. It is important to all
interests that you participate in the affairs of Bancshares regardless of the
number of shares you own. Accordingly, we urge you to fill out, sign, and return
the enclosed proxy promptly, even if you plan to attend the Meeting. You have
the option to revoke it at any time prior to the Meeting or to vote your shares
personally on request if you attend the Meeting.
Sincerely,
Marty E. Adams
President and Chief Executive Officer
<PAGE> 3
CITIZENS BANCSHARES, INC.
10 EAST MAIN STREET
SALINEVILLE, OHIO 43945
NOTICE OF 1998 ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF CITIZENS BANCSHARES, INC.
Notice is hereby given that the 1998 Annual Meeting of Shareholders of
Citizens Bancshares, Inc., will be held in the Raymond J. Lowry Auditorium of
the Fred H. Johnson Building, 10 East Main Street, Salineville, Ohio, on Monday,
May 11, 1998, at 7:00 p.m. (Eastern Daylight Time), for the following purposes:
1. To elect four (4) directors for three-year terms expiring in 2001.
2. To adopt and approve a Directors' Stock Retainer Plan for directors of
Citizens Bancshares, Inc., and its subsidiaries.
3. To adopt and approve a Non-Statutory Stock Option Plan for Non-Employee
Directors of Citizens Bancshares, Inc., and its subsidiaries.
4. To consider and act upon such other matters as may properly come before
the Meeting or any adjournment thereof.
Shareholders of record at the close of business on April 6, 1998, are
entitled to notice of and to vote at said Meeting and at any and all
adjournments thereof.
By Order of the Board of Directors,
Marty E. Adams, President & Chief
Executive Officer
Fred H. Johnson III, Secretary
April 10, 1998
SHAREHOLDERS ARE REQUESTED BY THE BOARD OF DIRECTORS TO FILL OUT
AND SIGN THE ENCLOSED FORM OF PROXY AND TO RETURN IT IN THE ACCOMPANYING
ENVELOPE.
A STATEMENT RELATING TO THIS PROXY IS
SET FORTH ON THE FOLLOWING PAGES.
<PAGE> 4
PROXY STATEMENT
ELECTION OF DIRECTORS
The Board of Directors of Citizens Bancshares, Inc. ("Bancshares"),
presently consists of ten (10) members, divided into three classes. The
directors in each class are elected for terms of three years so that at each
Annual Meeting the term of office of one class of directors expires. The terms
of office of Messrs. Marty E. Adams, Keith D. Burgett, Willard L. Davis and
Kenneth E. McConnell will expire on the day of the 1998 Annual Meeting, upon
election of their successors.
Proxies solicited hereunder granting authority to vote on the election of
directors will be voted for the election of Messrs. Adams, Burgett, Davis, and
McConnell to serve for three-year terms and until their successors are elected;
provided, however, that if the election of directors is by cumulative voting
(see page 15 of this Proxy Statement), the persons appointed by the accompanying
proxy intend to cumulate the votes represented by the proxies they receive and
distribute such votes in accordance with their best judgment. All of the
nominees are directors whose present terms of office will expire at the Annual
Meeting.
If any nominee is not available at the time of the election, proxies may be
voted for a substitute. However, Bancshares has no reason to believe that any of
the nominees will not be available.
As more fully described below, during 1997, Mr. Elden Surbey was appointed
to fill vacancies on the Bancshares Board of Directors (for a term expiring in
2000) and The Citizens Banking Company ("Citizens") Board of Directors,
respectively. In addition, following the Annual Meeting, H. Lee Kinney, who
served as UniBank's President and Chief Executive Officer, will be appointed to
fill a vacancy on the Bancshares Board of Directors for a term expiring at the
1999 Annual Meeting and a vacancy on the Citizens Board of Directors.
The following information, furnished to Bancshares by each director, sets
forth the name, age, principal occupation or employment of each director, and
the period during which he has served as a director of Bancshares and, prior to
its formation, as a director of Citizens. All of the current directors of
Bancshares are also directors of Citizens. As noted below, Messrs. Jonathan Levy
and Lee Smith serve as directors of Citizens only. In addition, some of the
Bancshares directors, namely, Messrs. Marty Adams and James McBane, are
directors of First National Bank of Chester ("FNB"). Except where otherwise
noted, each person has held his principal position for at least five years.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
(For terms expiring in 2001)
MARTY E. ADAMS (45). Vice Chairman of the Board, President, and Chief
Executive Officer of Bancshares and Citizens, Director since 1984. Director and
Chairman of the Board of FNB since 1990. Mr. Adams has been employed by Citizens
for 21 years in positions of increasing responsibility and as President and
Chief Executive Officer since 1987.
KEITH D. BURGETT (55). Director since 1988. Dr. Burgett is a veterinarian
and the owner of Carrollton Animal Hospital, Carrollton, Ohio. He is the owner
of Burgett Angus Farm, Carrollton, Ohio. Dr. Burgett is a member of the Ohio
State Veterinary Medical Licensing Board.
WILLARD L. DAVIS (68). Director since 1991. Mr. Davis is the President of
SPM Fleet Services, Inc. (an auto leasing company) in Wintersville, Ohio; Vice
President of State Park Motors, Inc. (an auto dealership) in Wintersville, Ohio;
and co-owner of Cardinal Motors, Inc. (an auto dealership) in Cadiz, Ohio.
KENNETH E. MCCONNELL (61). Director since 1973. Mr. McConnell owns and
operates McConnell's Farms and is a partner in McConnell's Farm Market (a meat
market), Richmond, Ohio.
1
<PAGE> 5
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE
AFTER THE ANNUAL MEETING
FRED H. JOHNSON (81). Director since 1965, Chairman of the Board from 1984
to 1995. Mr. Johnson is the retired former owner of Summitville Tile. Mr.
Johnson is the past President of Summitcrest, Inc., which operates angus cattle
farms in several states and is headquartered in Summitville, Ohio. (Term expires
in 2000.)
FRED H. JOHNSON III (36). Corporate Secretary, Director since 1988. Mr.
Johnson is a director and President of Summitcrest, Inc. Mr. Johnson is the son
of Fred H. Johnson. (Term expires in 1999.)
GERARD P. MASTROIANNI (42). Director since 1996 and a Citizens Director
since 1993. Mr. Mastroianni is President of Buckeye Village Market, Inc. (a
grocery store chain), Alliance, Ohio, and President of Alliance Ventures (a real
estate holding company), Alliance, Ohio. (Term expires in 2000.)
JAMES C. MCBANE (58). Chairman of the Boards of Bancshares and Citizens
since 1996, Director since 1964. Director of FNB since 1990. Principal and Chief
Executive Officer of McBane Insurance Agency, Inc., of Bergholz, Ohio. (Term
expires in 2000.)
ELDEN L. SURBEY (69). Director since March, 1997. Mr. Surbey was formerly a
director and Chairman of the Board of The Navarre Deposit Bank Company until its
affiliation with Bancshares in October, 1996. Mr. Surbey is founder and former
owner of Surbey Feed and Supply Company. (Term expires in 2000.)
GLENN F. THORNE (69). Director since 1994, Citizens Director since April,
1997. Mr. Thorne was formerly a director of The Firestone Bank from 1985 until
its affiliation with Bancshares in February, 1994. He is President and Chief
Executive Officer of Thorne Management, Inc., which owns and operates
supermarkets in Ohio and Pennsylvania and a leasing company in Ohio; Manager of
Bias Realty, Ltd., which owns and operates a supermarket and commercial rental
properties in Ohio; and General Partner of CPW Properties, Ltd., which owns and
operates commercial and residential properties in Ohio. Mr. Thorne is also a
Trustee of Mount Vernon Nazarene College. (Term expires in 1999.)
DIRECTORS OF CITIZENS
In addition to the individuals listed above, Messrs. Jonathan Levy and Lee
Smith serve as Directors of Citizens. Information with respect to Messrs. Levy
and Smith is set forth below.
JONATHAN A. LEVY (37). Director since 1996. Mr. Levy was formerly a
director of Western Reserve Bank of Ohio until its affiliation with Citizens in
1995. Mr. Levy is a partner of Redstone Investments (a real estate development,
construction, and management company), and President of Redstone Construction,
Inc.
LEE A. SMITH (45). Director since 1996. Mr. Smith is President and owner of
Pleasant View Nursing Home. Mr. Smith practiced law in Lisbon, Ohio, from 1978
until 1996.
2
<PAGE> 6
APPROVAL OF THE DIRECTORS' STOCK RETAINER PLAN
GENERAL
The Citizens Bancshares, Inc., Directors' Stock Retainer Plan (the
"Retainer Plan") is being submitted by the Board of Directors for approval by
the shareholders of Bancshares. The principal features of the Retainer Plan are
summarized below.
PURPOSE
The purpose of the Retainer Plan is to align further the interests of the
directors of Bancshares and its subsidiaries with the interests of shareholders
by providing that directors' annual compensation may be paid through the
issuance of Bancshares common shares.
SUMMARY OF THE RETAINER PLAN
Eligibility and Participation; Election. All current directors of
Bancshares and its subsidiaries (consisting of 15 persons), are eligible to
participate in the Plan. Future directors of Bancshares and its subsidiaries
will also be eligible to participate in the Plan. Directors may elect to treat
all or a designated portion of their fees (i.e., all compensation payable to
directors, including fees relating to the number of Board or Committee meetings
attended or Board or Committee positions held). Such elections shall be
irrevocable for each year and shall be made by January 31st, in advance of the
year in which participation in the Retainer Plan commences.
Payment Terms. Semi-annual director compensation is paid by Bancshares,
generally in June and December of each year. The number of Bancshares common
shares to be issued to those directors participating in the Retainer Plan shall
be determined by dividing the cash equivalent of the compensation amount by the
daily average of the bid prices for the common shares for the six (6) month
period immediately preceding the compensation payment date, rounded to the
nearest whole share. The number of common shares issuable under the Retainer
Plan shall be prorated with respect to directors who serve for less than the
applicable payment period.
Common Shares Subject to Retainer Plan. A total of 75,000 Bancshares common
shares (consisting of newly issued common shares or common shares purchased in
the market from time to time which are "restricted securities" for federal
securities law purposes) are authorized for issuance under the Retainer Plan.
The common shares granted under the Retainer Plan shall be automatically
adjusted to prevent dilution or enlargement of the rights of participants in the
event of any changes in the number or kind of outstanding common shares
resulting from a merger, recapitalization, stock exchange, or other change in
Bancshares' corporate or capital structure. The Board may at any time amend,
suspend, or terminate the Plan; provided, however, that any increase in the
number of common shares that may be granted under the Retainer Plan shall
require the prior approval of Bancshares' shareholders.
Effective Date; Expiration of Retainer Plan. If approved by the
shareholders at the Annual Meeting, the Retainer Plan will become effective
immediately; provided however, that no common shares will be issued under the
Retainer Plan until, at the earliest, December, 1998. Unless earlier terminated
by the Board, the Plan shall terminate on the tenth anniversary of its effective
date.
RECOMMENDATION AND VOTE:
The Board of Directors recommends that shareholders vote "FOR" the approval
of the Directors' Stock Retainer Plan. The affirmative vote of the holders of at
least a majority of the Bancshares common shares voting at the Annual Meeting in
person or by proxy is required to approve the Retainer Plan.
3
<PAGE> 7
APPROVAL OF THE STOCK OPTION PLAN
GENERAL
The Citizens Bancshares, Inc., 1998 Non-Statutory Stock Option Plan for
Non-Employee Directors (the "Option Plan") is being submitted by the Board of
Directors for approval by the shareholders of Bancshares. The principal features
of the Option Plan are summarized below.
PURPOSE
The Board of Directors believes that it is appropriate for Bancshares to
adopt the Option Plan, which permits the granting of awards of stock options
("Stock Options") to non-employee directors of Bancshares and its subsidiaries
as a method of enhancing its ability to attract and retain experienced and
knowledgeable directors with a proprietary interest in Bancshares' success and
progress. The Option Plan is similar to plans that have been adopted by
shareholders of a large number of public companies.
SUMMARY OF THE STOCK OPTION PLAN
Eligibility and Participation. All current non-employee directors of
Bancshares and its subsidiaries, consisting of fourteen (14) persons, are
eligible to participate in the Option Plan. Future directors of Bancshares or
its subsidiaries will also be eligible to participate in the Option Plan.
Plan Administration. A committee (the "Committee") comprised of not less
than two (2) disinterested members of the Bancshares Board of Directors shall,
subject to the terms of the Option Plan, be responsible for interpreting the
terms of the Option Plan; establishing and amending appropriate rules with
respect thereto; and determining the number of common shares subject to each
Stock Option and the terms thereof.
Common Shares Available Under the Option Plan; Non-Transferability of Stock
Options. The Option Plan provides for an aggregate of 125,000 common shares to
be reserved for issuance in connection with the grant of Stock Options. In the
event that a Stock Option is not exercised or expires, the common shares
relating thereto will again become available for issuance under the Option Plan.
Stock Options are not transferable by the participant, other than by will or by
the laws of descent and distribution.
Stock Option Awards. On an annual basis during the term of the Option Plan,
the Committee will (i) establish goals for eligible participants based upon
reaching specified earnings per share, return on shareholders' equity and other
performance-based measures, and (ii) subject to the terms of the Option Plan,
determine the aggregate number of Stock Options to be granted based upon such
goals and criteria. It is anticipated that grants of Stock Options to
non-employee directors will be made on an annual basis; provided however, in no
event will any grants be made until December, 1998, at the earliest.
Limitations on Stock Option Awards. The Option Plan specifically provides
that the annual determinations of the Stock Options to be issued under the
Option Plan shall be made by the Committee. The Plan further provides that
125,000 is the aggregate number of Bancshares common shares that may be issued
under the Option Plan.
Exercise Price of Stock Options. The exercise price for the purchase of
Bancshares common shares subject to Stock Options may not be less than 100% of
the fair market value of the common shares on the date of the grant. For
purposes of the Option Plan, the fair market value of a common share shall be
the closing bid quotation as reported on the NASDAQ National Market System on
the date of grant by the National Association of Securities Dealers, Inc., or if
no such quotations are available, as determined by the Committee.
Vesting and Term of Stock Options. Stock Options granted pursuant to the
Option Plan shall vest and shall be for a term determined by the Committee from
time to time; provided, however, that in no event shall the term be longer than
ten years from the date of grant. Notwithstanding the foregoing, in the event in
a "Control Share Acquisition" as defined in Bancshares' Amended Articles of
Incorporation or a sale of all or substantially all of the assets of Bancshares
and its subsidiaries, all Stock Options shall become immediately exercisable.
4
<PAGE> 8
Expiration of Stock Options. Stock Options are not exercisable by a
participant after three (3) months from the date that a participant ceases to
serve as a non-employee director with Bancshares or its subsidiaries, except
that in the event of a termination of service by reason of death or full
disability, all Stock Options shall become immediately exercisable for a
one-year period thereafter; but in no event later than the expiration date of
the Stock Options.
Adjustments Upon Changes in Capitalization. In the event that at any time
while Stock Options have been awarded and are outstanding, Bancshares' common
shares are changed into or exchanged for a different number or kind of shares or
other securities of Bancshares or another corporation by reason of any
reorganization, recapitalization, stock split-up, stock dividend, consolidation
of shares, merger or consolidation, then for purposes of the Option Plan, that
number of Stock Options that would maintain the value of the Stock Options
previously awarded shall be substituted therefor.
Effective Date; Termination and Amendment of Option and Plan. The Option
Plan will not become effective unless and until it is approved by the
shareholders of Bancshares and will continue for a period of ten (10) years from
its effective date. The Board of Directors may at any time terminate or modify
the Option Plan; provided, however, that the Board may not, without approval of
the shareholders, (i) materially increase the total number of common shares
available for issuance; (ii) materially modify eligibility requirements for
participants; or (iii) materially increase the benefits accruing to participants
under the Plan.
FEDERAL INCOME TAX CONSEQUENCES.
Under current federal income tax laws, awards under the Option Plan will
have the following consequences:
(1) The grant of an award of Stock Options will, by itself, not result in
recognition of taxable income to the participant nor will it entitle
Bancshares to a deduction at the time of grant.
(2) The exercise of a Stock Option will result in the recognition of
ordinary income by the participant on the date of exercise in an amount
equal to the difference between the exercise price and the fair market
value on the date of exercise of the common shares acquired pursuant to
the exercise.
(3) Bancshares will be allowed to deduct at the time, and in the amount of,
any ordinary income recognized by the participant under the
circumstances described above, provided Bancshares meets its federal
reporting obligations.
AWARDS GRANTED UNDER THE OPTION PLAN.
No Stock Option awards have been made under the Option Plan pending receipt
of requisite shareholder approval. If the Option Plan is approved by the
shareholders, the Committee will consider initial grants to eligible
participants, but in no event will any grants be made before December, 1998.
Neither the amounts nor the recipients of such grants has yet been determined.
RECOMMENDATION AND VOTE.
The Board of Directors recommends that shareholders vote "FOR" the approval
of the Option Plan. The affirmative vote of the holders of at least a majority
of the Bancshares common shares voting at the Annual Meeting in person or by
proxy is required to approve the Option Plan.
CERTAIN MATTERS PERTAINING TO THE BOARDS OF DIRECTORS
The Board of Directors of Bancshares held 4 regularly scheduled quarterly
meetings and 8 special meetings in 1997. The Board of Directors of Citizens held
12 regularly scheduled monthly meetings in 1997. The Board of Directors of FNB
held 12 regularly scheduled monthly meetings in 1997. Committees of the various
Boards met from time to time upon call of the President. Each director (with the
exception of Mr. Fred Johnson) attended 75% or more of the aggregate of all
meetings of the Boards and the Board committees on which he served during the
year.
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<PAGE> 9
In 1997, each director who served on both the Bancshares and Citizens
Boards of Directors was paid an annual retainer of $14,800. The directors of
Bancshares only were entitled to receive an annual retainer of $9,800 and
directors of Citizens only were entitled to receive an annual retainer of $9,800
in 1997. Directors were also paid an attendance fee of $450 for meetings of the
Boards and $150 for meetings of their respective committees. For his service as
Chairman of the Board of Bancshares and Chairman of the Board of Citizens during
1997, Mr. McBane was paid $15,000 and $20,000, respectively.
The Citizens Audit Committee, whose primary function is to represent the
Board in discharging its responsibilities relating to the accounting, reporting,
and financial control practices of Citizens, is comprised of Messrs. Burgett,
Johnson III, McConnell, Smith and, since May, 1997, Mr. Surbey. This committee
held three meetings in 1997.
The FNB Examining Committee, whose primary function is to represent the
Board in discharging its responsibilities relating to the accounting, reporting,
and financial control practices of FNB, is comprised of Messrs. McBane, John B.
Adkins, John D. Fitzjohn, and Edwin W. Morse. One meeting was held by this
committee in 1997.
The Bancshares Personnel and Compensation Committee, whose primary function
is to administer the Citizens Bancshares, Inc., Non-Statutory Stock Option and
Stock Appreciation Rights Plan (the "Stock Option Plan") and to review
compensation of all officers and employees of Bancshares, is comprised of
Messrs. Davis, Johnson III, Mastroianni, McConnell, and Thorne. This committee
held three meetings in 1997.
The Citizens Personnel and Compensation Committee, whose primary function
is to review compensation of all officers and employees of Citizens, is
comprised of Messrs. Davis, Johnson III, Mastroianni, and McConnell. The
Committee held two meetings in 1997.
BANCSHARES PERSONNEL AND COMPENSATION COMMITTEE
AND CITIZENS PERSONNEL AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Messrs. Davis, Johnson III, Mastroianni, McConnell, and Thorne, being all
of the members of the Bancshares Personnel and Compensation Committee and
Messrs. Davis, Johnson III, Mastroianni, and McConnell, being all of the members
of the Citizens Personnel and Compensation Committee, hereby make the following
report with respect to executive officer compensation policies of Bancshares and
its subsidiaries, respectively:
(1) The compensation of executive officers of Bancshares (and its subsidiaries),
including the executive officers named in the Summary Compensation Table on
page 8 hereof, is based, subject to the provisions of applicable employment
agreements, upon a number of factors relating to achievement of individual
goals and objectives; corporate performance (including, but not limited to,
return on shareholders' equity); stock price performance; a review of
compensation data of other entities within Bancshares' peer group with
similar financial results and of a similar size; and prevailing economic
conditions.
(2) The compensation of Mr. Adams is based upon the same factors as are outlined
immediately above, subject to the provisions of his employment agreement
(3) All 1997 compensation decisions with respect to all of the executive
officers named in the Summary Compensation Table on page 8 hereof were made
during November of 1996.
By: Willard L. Davis
Fred H. Johnson III
Gerard P. Mastroianni
Kenneth E. McConnell
Glenn F. Thorne
Chairman McBane also attended all committee meetings.
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<PAGE> 10
SECURITY OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS, AND CERTAIN BENEFICIAL OWNERS
Based on information supplied as of April 6, 1998, no person owns more than
5% of the outstanding common shares of Bancshares. As of April 6, 1998, there
were 6,832,739 common shares of Bancshares issued and outstanding, plus 60,743
treasury shares.
The following table sets forth as of April 6, 1998, the number of common
shares owned by each director of Bancshares and Citizens, by each executive
officer named in the Summary Compensation Table, and by all directors and
executive officers as a group, based solely on information furnished to
Bancshares by such persons:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL PERCENT
NAME OWNERSHIP(A) OF CLASS
---- -------------------- --------
<S> <C> <C>
Marty E. Adams.............................................. 59,908(b) *
Keith D. Burgett............................................ 10,584(c) *
Willard L. Davis............................................ 52,899(d) *
Fred H. Johnson............................................. 21,450 *
Fred H. Johnson III......................................... 64,186(e) *
Jonathan A. Levy**.......................................... 4,566 *
Gerard P. Mastroianni....................................... 6,376 *
James C. McBane............................................. 75,042(f) 1.10
Kenneth E. McConnell........................................ 44,092(g) *
Lee A. Smith**.............................................. 7,662(h) *
Elden L. Surbey............................................. 1,852 *
Glenn F. Thorne............................................. 56,775(i) *
Frank J. Koch............................................... 3,375(j) *
William L. White III........................................ 2,018(k) *
All Executive Officers and Directors as a Group (18
persons).................................................. 434,432(l) 6.36
</TABLE>
- ---------------
* Bancshares Common shares owned represent less than 1% of the class.
** Directors of Citizens only.
(a) Unless otherwise indicated, the person has sole voting and investment power
as to the common shares held. Does not include common shares owned
individually by spouses.
(b) Shared voting and investment power as to 31,787 of the 59,908 common shares.
Includes 27,000 shares pursuant to stock option exercise which have not yet
been issued by Bancshares. Also includes 1,121 common shares allocated to
Mr. Adams in the Citizens Bancshares, Inc., Employee Stock Ownership Plan
("Bancshares ESOP").
(c) Shared voting and investment power. Includes 4,143 common shares held by
children, as to which Dr. Burgett has power of attorney.
(d) Shared voting and investment power. Includes 2,811 shares held as co-trustee
of a trust.
(e) Includes 63,186 common shares held in a trust as to which Mr. Johnson is the
sole trustee and beneficiary.
(f) Includes 6,596 common shares held as custodian for minor child.
(g) Shared voting and investment power as to 4,498 of the 44,092 common shares.
(h) Shared voting and investment power as to 5,360 of the 7,662 common shares.
(i) Includes 56,775 common shares held by Thorne Management, Inc., of which Mr.
Thorne is President and Chief Executive Officer.
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<PAGE> 11
(j) Shared voting and investment power as to 2,458 of the 3,375 common shares.
Includes 917 common shares allocated to Mr. Koch in the Bancshares ESOP.
(k) Includes 500 common shares allocated to Mr. White in the Bancshares ESOP.
(l) Includes an aggregate of 4,101 common shares of the Bancshares ESOP
allocated to executive officers.
IDENTIFICATION OF EXECUTIVE OFFICERS
In addition to Mr. Adams, President and Chief Executive Officer, with
respect to whom information is provided on page 1 of the Proxy Statement, the
following persons serve as executive officers of Bancshares and/or one of its
banking subsidiaries:
FRANK J. KOCH (45). Executive Vice President, Citizens, since 1988.
LAWRENCE P. CROW (51). Senior Vice President and Branch Administrator,
Citizens, since 1987; previously Vice President, Citizens.
THOMAS G. LEEK (49). Senior Vice President, Bank Operations, Citizens,
since 1989.
PATRICK A. SEBASTIANO (40). Senior Vice President and Trust Officer of FNB
since March, 1997; previously Senior Vice President and Senior Trust Officer at
Mahoning National Bank, Youngstown, Ohio, from 1989 to 1997.
WILLIAM L. WHITE III (39). Senior Vice President and Chief Financial
Officer, Citizens, since 1991.
JAYSON M. ZATTA (37). Senior Vice President and Manager, Commercial
Banking Department, Citizens, since 1993; previously Vice President and Manager
of the Commercial Banking Department from 1989 to 1993.
Other than as set forth in this Proxy Statement, there is no plan or
arrangement for the future payment of compensation by Bancshares or any of its
subsidiaries to any executive officer of Bancshares, Citizens, or FNB,
respectively.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
--------------------------- ---- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Marty E. Adams, President and Chief
Executive 1997 250,000 170,000 45,500(a) 33,000(d)
Officer of 1996 236,000 120,000 42,690(a) 30,000(d)
Bancshares and Citizens 1995 225,000 110,000 44,233(a) 20,000(d)
Frank J. Koch, 1997 120,000 69,000 22,200(b) 4,000(e)
Executive Vice 1996 115,500 59,000 18,190(b)
President of Citizens 1995 110,000 52,500 19,733(b)
William L. White III, 1997 92,000 35,000 17,600(c)
Senior Vice President and 1996 88,000 25,000 13,572(c)
Chief Financial Officer 1995 85,000 22,500 14,142(c)
of Citizens
</TABLE>
- ---------------
(a) Includes director retainers of $14,800 for each of 1997, 1996, and 1995,
respectively, and fees for meeting attendance of $8,500, $9,700 and $9,700,
respectively in 1997, 1996, and 1995. Also includes amounts allocable under
the Citizens Bancshares, Inc., Profit Sharing Plan and Trust (the "Profit
Sharing Plan") and the Bancshares ESOP (discussed more fully below under
"Compensation Pursuant to Plans") as follows:
8
<PAGE> 12
Profit Sharing Plan - $18,800 in 1997, $16,290 in 1996, and $17,850 in 1995;
Bancshares ESOP - $3,400 in 1997, $1,900 in 1996, and $1,883 in 1995.
(b) Includes amounts allocable under Profit Sharing Plan and Bancshares ESOP
(discussed more fully below under "Compensation Pursuant to Plans") as
follows: Profit Sharing Plan - $18,800 in 1997, $16,290 in 1996, and $17,850
in 1995; Bancshares ESOP - $3,400 in 1997, $1,900 in 1996, and $1,883 in
1995.
(c) Includes amounts allocable under Profit Sharing Plan and Bancshares ESOP
(discussed more fully below under "Compensation Pursuant to Plans") as
follows: Profit Sharing Plan - $14,900 in 1997, $12,272 in 1996, and $12,793
in 1995; Bancshares ESOP - $2,700 in 1997, $1,300 in 1996, and $1,349 in
1995.
(d) Insurance premiums paid by Bancshares on a reverse split dollar policy for
the sole benefit of executive having a current cash value of $69,605 and a
$525,000 death benefit.
(e) Deferred compensation for the sole benefit of executive.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
MR. ADAMS
In 1992, Bancshares and Citizens entered into an employment agreement with
Mr. Adams (the "Agreement") for an initial employment period extending until
January 1, 1994. The Agreement was amended in 1993 to extend Mr. Adams'
employment period through January 1, 1997, and to provide for automatic
three-year extensions commencing January 1, 1994. As compensation for his
services as President and Chief Executive Officer of both Bancshares and
Citizens, Mr. Adams is entitled to: (i) an annual base salary of at least
$180,000; (ii) an annual bonus to be determined by Bancshares' Board of
Directors; (iii) continued participation in the Profit Sharing Plan and the
Bancshares ESOP; and (iv) other benefits, perquisites, and plans in effect as of
the date of the Agreement, as disclosed elsewhere in this Proxy Statement. In
the event Mr. Adams' employment terminates other than for cause, the principal
severance-related benefits payable to Mr. Adams under the Agreement are: (i) in
the event of death, two years of base salary plus insurance and health care
benefits for his spouse until the date of normal retirement age; (ii) in the
event of retirement or disability, such benefits as are payable in accordance
with Bancshares' retirement or long-term disability plan then in effect, as the
case may be; and (iii) in the event of a voluntary termination for "good reason"
(including a change-in-control) or a termination by Bancshares or Citizens
without cause, base salary and accrued bonus through the termination date, a
lump-sum payment equal to 2.9 times current annual salary and a continued right
to participate in all benefit plans for up to two years. If a termination for
cause occurs, Bancshares and Citizens agree to continue Mr. Adams' existing
health insurance (or provide comparable coverage) for a one-year period.
MR. KOCH
During 1993, Bancshares and Citizens entered into an employment agreement
with Mr. Koch (the "Koch Agreement") which provides for an initial employment
period extending until January 1, 1996, subject to annual two-year automatic
extensions commencing January 1, 1995. As compensation for his service as the
Executive Vice President of Citizens, Mr. Koch is entitled to: (i) an annual
salary equal to his salary for the immediately preceding year (plus an increase
calculated in a manner which is at least as favorable as pay increases for other
Citizens executives); (ii) discretionary annual bonuses; (iii) continued
participation in the Profit Sharing Plan and the Bancshares ESOP; and (iv) other
benefits, perquisites, and plans in effect as of the date of the Koch Agreement,
as disclosed elsewhere in this Proxy Statement. The Koch Agreement provides
that, in the event of a change-in-control of Bancshares, Mr. Koch is to continue
to be employed by Citizens in an executive position until the earlier of: (i)
normal retirement or (ii) 24 months, during which time he shall receive: (a) the
salary and bonus thereto described above; (b) certain insurance and health
benefits; and (c) continued participation in the Profit Sharing Plan. Following
a change-in-control, if Mr. Koch's employment with Citizens is terminated by
Bancshares or Citizens for any reason, including death or disability (but
excluding misconduct) or by Mr. Koch for cause, Mr. Koch shall receive, for a
twenty-four (24) month period from the date of the change-in-control: (i)
monthly salary at the level of the highest monthly salary received from Citizens
during the twelve months
9
<PAGE> 13
immediately preceding the change-in-control; (ii) the right to health care
benefits and continued participation in the Profit Sharing Plan, if possible;
and (iii) a bonus based upon a prescribed formula. Notwithstanding the
foregoing, if Mr. Koch, at his option, terminates his employment within six
months of a change-in-control, he is entitled to receive one year's salary plus
a bonus prorated to the date of termination of employment.
TRANSACTIONS WITH BANCSHARES
Directors and executive officers of Bancshares and its subsidiaries and
their respective associates, including immediate families, have had transactions
with Bancshares and its subsidiaries in the ordinary course of business and
additional transactions may be expected to take place in the ordinary course of
business in the future. Such transactions have included, and may in the future
include, loans to spouses of directors and executive officers in connection with
their respective businesses and investments. Loans and commitments included in
such transactions were made in the ordinary course of business on substantially
the same terms, including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and did not include more
than the normal risk of collectibility or present other unfavorable features. At
no time did the maximum extension of credit to any one such person exceed ten
percent (10%) of the equity of either Citizens or FNB.
COMPENSATION PURSUANT TO PLANS
Bancshares and its subsidiaries maintain four plans in which the executive
officers named in the Summary Compensation Table on page 8 hereof participated
during 1997: the Profit Sharing Plan, the Bancshares ESOP, the Employees
Retirement Plan for Citizens Bancshares, Inc. (the "Bancshares Pension Plan"),
and the Stock Option Plan. These plans, except for the Stock Option Plan, are
covered by the Employee Retirement Income Security Act of 1974, as amended, and
are intended to be qualified plans under Section 401(a) of the Internal Revenue
Code of 1986, as amended.
PROFIT SHARING PLAN. Citizens established the Profit Sharing Plan on
December 31, 1974, effective as of December 31, 1974, to share a portion of its
profits with its employees in order to promote in them a strong interest in the
successful operation of the business and increased efficiency in their work, to
assure them that they would share in the prosperity of the business, and to
provide an opportunity for an accumulation of funds for their retirement and
financial emergencies. Any employee of Citizens who works 1,000 hours during the
calendar year is eligible to participate in the Profit Sharing Plan. The Profit
Sharing Plan covers substantially all employees of Citizens. Total contributions
expensed and paid in 1997 were $879,400. Amounts to be contributed to the Profit
Sharing Plan are annually determined by the Board of Directors of Citizens. In
connection with the Profit Sharing Plan, the "CBC Salineville Profit Sharing
Trust" was created in order to enable participating employees of Citizens to
share in the profits of the business in accordance with the Profit Sharing Plan.
In no event will the principal or income of this trust be paid to or invested in
Citizens, or be used for any purpose whatsoever other than for the exclusive
benefit of the participating employees or their beneficiaries.
Profit sharing contributions are made pursuant to a formula based on up to
15% of Citizens' qualifying employees' W-2 wages of up to $160,000 (excluding
group term life). Under this formula, the executive officers named in the
Summary Compensation Table on page 8 of the Proxy Statement received
approximately the following profit sharing contributions in 1997: Marty E.
Adams, $18,800; Frank J. Koch, $18,800; and William L. White III, $14,900.
BANCSHARES ESOP. Pursuant to action taken by its Board of Directors on
August 15, 1989, Bancshares established the Bancshares ESOP effective as of
January 1, 1989. The purpose of the Bancshares ESOP is to permit employees of
Bancshares and its affiliates to acquire stock ownership interest in Bancshares.
Employees become eligible to participate in the Bancshares ESOP on December 31
of the year in which they (i) attain age 21 and (ii) are credited with at least
1,000 hours of service. Employer contributions to the Bancshares ESOP are
discretionary and are determined by the Bancshares Board of Directors or a
committee thereof annually. Employee participants are not permitted to make
contributions to the Bancshares ESOP. Allocations of contributions to the
Bancshares ESOP are made to the accounts of the participants on the basis of the
individual participant's compensation relative to the total compensation of all
participants in the Bancshares ESOP.
10
<PAGE> 14
Bancshares ESOP participants obtain vested interests in the employee stock and
cash allocated to their accounts beginning with the third year of participation
at the rate of 20%; thereafter, vesting increases by 20% for every additional
year of participation such that 100% vesting occurs at year 7. Vesting credit is
given only for credited services with the employer after January 1, 1989. If a
Bancshares ESOP participant terminates service due to death, disability, or
retirement (at age 65, or age 55 with 7 years of service), he or she will become
100% vested in his or her account and will be entitled to a distribution of
benefits no later than the end of the year following the year of his or her
termination. If participation in the Bancshares ESOP terminates for any other
reason, a participant is entitled to distribution of his or her vested account
starting no later than the end of the year following the five-year period from
the date of termination. A terminating participant may choose to have his or her
account distributed in stock or cash. The stock is subject to (i) a put option
which gives the participant the right, for a limited time, to have Bancshares
repurchase the stock and (ii) a right of first refusal which gives Bancshares
the right to match any offer made by a third party. The Bancshares ESOP was
initially funded by Bancshares on December 29, 1989, with 3,333 Bancshares
common shares having an estimated fair market value of $100,000. An additional
3,000 common shares having an estimated fair market value of $98,250 were added
in 1990. No contribution was made to the Bancshares ESOP in 1991. However,
pursuant to the 25% stock dividend paid May 1, 1991, 1,583 common shares were
added in 1991. An additional 3,000 common shares having an estimated fair market
value of $101,590 were added in 1992. Pursuant to the 2-for-1 stock split paid
April 15, 1993, 10,916 common shares were added in 1993. No contribution was
made to the Bancshares ESOP in 1994. An additional 7,000 common shares having an
estimated fair market value of $250,000 were added in 1995. Pursuant to the
3-for-2 stock split paid January 12, 1996, 14,416 common shares were added in
1996 in addition to 5,724 common shares having an estimated fair market value of
$172,000. No contribution to the Bancshares ESOP was made in 1997.
The executive officers named in the Summary Compensation Table on page 8 of
the Proxy Statement will receive Bancshares ESOP contributions with respect to
1997 in approximately the following amounts: Marty E. Adams, $3,400; Frank J.
Koch, $3,400, and William L. White III, $2,700.
BANCSHARES PENSION PLAN. Since January 1, 1994, the Bancshares Pension
Plan has covered all full-time employees of Bancshares and its subsidiaries who
completed 1,000 hours of service within a calendar year. No owners, directors,
or executive officers of Bancshares were covered by the Bancshares Pension Plan
prior to January 1, 1994. The years of service used to determine pension amounts
("credited service") are generally limited to an employee's service while a Plan
participant.
The Bancshares Pension Plan provides for normal retirement at age 65, and
early retirement at age 55 for employees with 10 years of corporate service
("vesting service"). Retirement benefits for normal retirement are 1.1% of the
employee's average earnings (the highest average over the 5 consecutive calendar
years during his or her last 10 calendar years with Bancshares) times his years
of credited service up to 35 years. Earnings are defined as current W-2
earnings. Employees who terminate employment after 5 years of service have a
vested right to receive an unreduced normal retirement pension beginning at age
65, or a reduced early retirement pension beginning at age 55.
The Firestone Bank Employees Retirement Plan and the New Waterford Bank
Pension Plan were merged into the Bancshares Pension Plan on January 1, 1995.
Benefits which accrued to Firestone Bank or New Waterford Bank participants
prior to the plan merger (reflecting service with those banks prior to the
merger) have been grandfathered; this may result in benefits higher than shown
in the table below for individuals with Firestone or New Waterford service.
The following table shows annual pension benefits payable upon retirement
at age 65 for various compensation and years-of-service classifications,
assuming election of a retirement benefit payable as a straight life annuity
with retirement on January 1, 1997. The Plan bases annual pension benefits on a
participant's 5-year average pay (with 5-year averages calculated on the
assumption that each participant's pay increased 4% annually) and years of
service. The 1997 Compensation for this purpose is the same as the total of
salary and bonus as disclosed in the Summary Compensation Table, but not more
than $160,000 (the 1997 limit imposed by
11
<PAGE> 15
Section 401(a)(17) of the Internal Revenue Code). See footnote (1) to the Table.
Annual benefits payable are not subject to any deduction for Social Security or
other offset amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
1997 ---------------------------------------------------
COMPENSATION(1)(2) 15 20 25 30 35
- ------------------ ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $19,098 $ 25,464 $ 31,831 $ 38,197 $ 44,563
150,000 22,918 30,557 38,197 45,836 53,475
175,000 26,738 35,650 44,563 53,475 62,388
200,000 30,557 40,743 50,929 61,115 71,300
225,000 34,377 45,836 57,295 68,754 80,213
250,000 38,197 50,929 63,661 76,393 89,125
300,000 45,836 61,115 76,393 91,672 106,951
350,000 53,475 71,300 89,125 106,951 124,776
400,000 61,115 81,486 101,858 122,229 142,601
450,000 68,754 91,672 114,590 137,508 160,426
500,000 76,393 101,858 127,322 152,787 178,251
</TABLE>
- ---------------
(1) Section 401(a)(17) of the Internal Revenue Code limits the amount of annual
compensation that may be used to determine benefit amounts under pension
plans such as the Bancshares Pension Plan. This limit was $160,000 for 1997
and will remain at $160,000 for 1998. The benefit amounts shown in the table
have been calculated without regard to this limit, since it is subject to
future adjustments.
(2) Marty E. Adams, Frank J. Koch, and William L. White III each had four years
of credited service under the Bancshares Pension Plan as of January 1, 1998.
They were, however, fully vested in their accrued benefits as of that date.
STOCK OPTION PLAN. The Stock Option Plan provides for the issuance of
non-qualified stock options ("Options") and stock appreciation rights ("SARs")
to officers of Bancshares and its subsidiaries. The exercise price for the
Options and SARs may not be less than 100% of the fair market value of
Bancshares common shares on the date of the grant. The fair market value of a
common share shall be the closing bid quotation as reported on the NASDAQ
National Market System on the grant date. The Stock Option Plan provides that
SARs will be exercised automatically upon the exercise of the Options granted in
connection therewith. The vesting of Options and SARs is as determined from time
to time by the committee which administers the Stock Option Plan; provided,
however, that in no event shall the term of any Options and SARs be longer than
ten years from the date of grant. Notwithstanding the foregoing, in the event of
a "Control Share Acquisition" as defined in Bancshares' Fourth Amended Articles
of Incorporation or a sale of all or substantially all of the assets of
Bancshares and its subsidiaries, all Options and SARs shall become immediately
exercisable. In the aggregate, 450,000 options on Bancshares common shares and
675,000 SARs are issuable in connection with the Stock Option Plan. As of April
6, 1998, there were 66,663 Bancshares common shares covered by outstanding
Options and SARs held by 83 persons which are exercisable at exercise prices
ranging from $23 to $72 per share.
Information is set forth below with respect to the grants of Options and
tandem SARs under the Stock Option Plan to the officers named in the Summary
Compensation Table during the year ended December 31, 1997. The Stock Option
Plan is administered by the Bancshares Personnel and Compensation Committee of
the Board of Directors, which determines the officers of Bancshares and its
subsidiaries to whom Options and SARs are granted and the vesting, term, and
exercise thereof. In the event of a change-in-control of Bancshares, as defined
in the Stock Option Plan, all of the Option and SAR grants shown below would
become immediately exercisable.
12
<PAGE> 16
OPTION/SAR GRANTS IN 1997
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES UNDERLYING OPTIONS/SARS EXERCISE OF GRANT DATE
NAME AND OPTION/SARS GRANTED GRANTED TO EMPLOYEES BASE PRICE EXPIRATION PRESENT VALUE
PRINCIPAL POSITION (#) IN FISCAL YEAR ($/SH) DATE ($)(1)
------------------ --------------------- -------------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Marty E. Adams............. 2,190(2) 14.9 32.50 01/01/07 18,089
President and
Chief Executive Officer
of Bancshares and Citizens
Frank J. Koch.............. 1,074(2) 7.3 32.50 01/01/07 8,871
Executive Vice President
of Citizens
William L. White III....... 522(2) 3.5 32.50 01/01/07 4,312
Senior Vice President
and Chief Financial Officer
of Citizens
</TABLE>
- ---------------
(1) The dollar amounts in this column are the result of calculations made using
the Black-Scholes model, a theoretical method for estimating the present
value of stock options based on complex assumptions about the stock's price
volatility and dividend rate as well as interest rates. Because of the
unpredictable assumptions required, the Black-Scholes model, or any other
valuation model, is incapable of accurately predicting Bancshares' stock
price or of placing an accurate present value on options to purchase this
stock. In spite of any theoretical value which may be placed on a stock
option grant, no increase of the stock option's value is possible without an
increase in the market value of the underlying stock. Any appreciation in
the market value of Bancshares' stock would benefit all shareholders and
would be dependent in part upon the efforts of the named executive officers.
In determining the grant date present value under the Black-Scholes model,
the following underlying assumptions were used:
<TABLE>
<S> <C>
Exercise Price.............................................. $32.50
Riskless Rate of Return..................................... 6.21%(a)
Volatility Measure.......................................... 26.20%(b)
Duration (in Years)......................................... 5
Stock Price................................................. $32.50(c)
Dividend Yield.............................................. 3.00%
Black-Scholes Value of Each Option.......................... $ 8.26
</TABLE>
-----------------------
(a) 5-year continuously compounded treasury yield as of January 1,
1997, the date of grant.
(b) The volatility was calculated on a natural logarithmic basis of
Bancshares' stock price for each month-end in the 32-month period
preceding the date of grant.
(c) Stock price at date of grant.
(2) Options and SARs become exercisable January 1, 2001.
13
<PAGE> 17
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
NAME AND SHARES ACQUIRED VALUE FY-END($) FY-END($)
PRINCIPAL POSITION ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
------------------ --------------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Marty E. Adams.................... 75,000 3,496,875 4,038 171,017
President and
Chief Executive Officer
of Bancshares and Citizens
Frank J. Koch..................... 0 0 14,720 724,101
Executive Vice President
of Citizens
William L. White III.............. 0 0 5,692 278,394
Senior Vice President
and Chief Financial Officer
of Citizens
</TABLE>
PERFORMANCE GRAPH
The following line graph is designed to compare the yearly percentage
change in Bancshares' cumulative total shareholder return on its common shares
during fiscal years 1992 through 1997 with (i) the cumulative total return of
the NASDAQ Bank Stocks Index (the "NASDAQ Bank Index") and (ii) the cumulative
total return of the S&P 500 Index (the "S&P 500") (assuming reinvestment of
dividends).
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
CITIZENS BANCSHARES, INC., NASDAQ BANK STOCK INDEX, AND S&P 500
<TABLE>
<CAPTION>
CITIZENS
MEASUREMENT PERIOD BANCSHARES, NASDAQ
(FISCAL YEAR COVERED) INC. BANK STOCKS S&P 500
<S> <C> <C> <C>
12/31/92 100.000 100.000 100.000
12/31/93 170.221 114.042 109.755
12/31/94 200.178 113.627 111.253
12/31/95 247.707 169.221 153.117
12/31/96 286.880 223.412 188.789
12/31/97 645.762 377.438 252.039
</TABLE>
Return is based on $100 invested on December 31, 1992, and the reinvestment of
dividends.
The financial information upon which the NASDAQ Bank Index and the S&P 500 are
based has been compiled from information issued by the companies themselves or
other secondary sources. Although these sources are considered to be reliable,
management makes no representations or warranties with respect to the accuracy
or completeness of this analysis or the underlying data, and specifically
disclaims any implied warranties of merchantability or fitness for any
particular purpose. This analysis does not purport to be a complete analysis nor
does it constitute an offer or recommendation to buy or sell any securities.
14
<PAGE> 18
INFORMATION REGARDING AUDITORS
Crowe, Chizek and Company LLP, Certified Public Accountants, were engaged
on June 20, 1989, as independent auditors, by the Board of Directors of
Bancshares, effective for the year ended December 31, 1989, and have continued
in that capacity for the year ended December 31, 1997. Their engagement was
based upon the recommendation of Citizens' Audit Committee.
Pursuant to the recommendation of the Citizens Audit Committee, the Board
of Directors has retained Crowe, Chizek and Company LLP as independent auditors
of Bancshares' consolidated financial statements for the year ending December
31, 1998. A representative of Crowe, Chizek and Company LLP will be at the
Meeting of the shareholders, will have the opportunity to make a statement if he
or she desires to do so, and will be available to respond to appropriate
questions.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
The 1999 Annual Meeting of Shareholders is expected to be held on or about
March 25, 1999. Any shareholder who is the record or beneficial owner of at
least 1% or $1,000 in market value of Bancshares common shares entitled to vote
at the 1999 Annual Meeting of Shareholders and who has held such shares for at
least one year may present a proposal at the 1999 Annual Meeting. Any
shareholder who intends to present a proposal at the 1999 Annual Meeting and who
wishes to have the proposal included in the Bancshares Proxy Statement and form
of proxy for that meeting must deliver the proposal to Bancshares no later than
October 28, 1998.
MISCELLANEOUS
The accompanying proxy is solicited by the Board of Directors of Bancshares
and will be voted in accordance with the instruction thereon if it is returned
duly executed and is not revoked. A shareholder may revoke his or her proxy
without affecting any vote previously taken by giving notice to Bancshares in
writing or in the open meeting.
Bancshares will bear the cost of preparing and mailing this statement, with
the accompanying proxy and other instruments. In addition to using the mails,
directors, officers, and other employees of Bancshares acting on its behalf, may
also solicit proxies. Proxies may be solicited personally, by telephone, or by
telegram.
The record date for determination of shareholders entitled to vote at the
1998 Annual Meeting is April 6, 1998. On that date, the outstanding voting
securities of Bancshares were 6,832,739 common shares, without par value, which
does not include 60,743 treasury shares. Each share has one vote.
Under the General Corporation Law of Ohio, if notice in writing is given by
any shareholder to the President or any Vice President or the Secretary of
Bancshares, not less than 48 hours before the time fixed for holding the
Meeting, that the shareholder desires that the voting for election of directors
shall be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the Meeting, each shareholder will have cumulative voting
rights. Cumulative voting means that each shareholder is entitled to that number
of votes equal to the number of shares that he or she owns multiplied by the
number of directors to be elected. Each shareholder may cast all of his or her
votes for a single nominee or may distribute his or her votes among as many
nominees as he or she sees fit. As indicated on page 1 of this Proxy Statement,
if the election of directors is by cumulative voting, the persons appointed by
the accompanying proxy intend to cumulate the vote represented by the proxies
they receive and distribute such votes in accordance with their best judgment.
15
<PAGE> 19
OTHER MATTERS
The Board of Directors does not know of any matters, other than the
election of directors, the approval of a Directors' Stock Retainer Plan, and the
approval of a Non-Statutory Stock Option Plan for Non-Employee Directors, which
will come before the Meeting. In case any other matters should properly come
before the Meeting, it is the intention of the persons named in the enclosed
proxy to vote in accordance with their best judgment.
By Order of the Board of Directors,
MARTY E. ADAMS
President & Chief Executive Officer
Citizens Bancshares, Inc.
April 10, 1998
<PAGE> 20
CITIZENS BANCSHARES, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS CALLED FOR
MAY 11, 1998
The undersigned having received, together with the Proxy Statement dated
April 10, 1998, notice of the Meeting of Shareholders of Citizens Bancshares,
Inc. ("Bancshares") to be held May 11, 1998 at 7:00 p.m., hereby designates and
appoints Marty E. Adams and James C. McBane as proxies for the undersigned, with
full power of substitution, to exercise all the powers that the undersigned
would have if personally present to act and to vote all of the shares that the
undersigned is entitled to vote at the Bancshares Special Meeting, unless
revoked, and at any adjournment or postponement thereof, such proxies being
directed to vote as specified below on the following proposal:
MANAGEMENT RECOMMENDS A VOTE "FOR" PROPOSAL 1, PROPOSAL 2, PROPOSAL 3 AND
PROPOSAL 4.
<TABLE>
<S> <C> <C> <C> <C>
PROPOSAL 1: Election of Directors:
Marty E. Adams FOR [ ] WITHOLD [ ]
Keith D. Burgett FOR [ ] WITHOLD [ ]
Willard L. Davis FOR [ ] WITHOLD [ ]
Kenneth E. McConnell FOR [ ] WITHOLD [ ]
</TABLE>
PROPOSAL 2: To approve and adopt a Directors' Stock Retainer Plan for Directors
of Bancshares and its subsidiaries.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 3: To approve and adopt a Non-Statutory Stock Option Plan for
Non-Employee Directors of Bancshares and its subsidiaries.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 4: To approve the adjournment of the Bancshares Annual Meeting in order
to allow the further solicitation of proxies.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on reverse side)
(Continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR PROPOSAL 1, FOR PROPOSAL 2,
FOR PROPOSAL 3 AND FOR PROPOSAL 4. ALL PROXIES PREVIOUSLY GIVEN ARE HEREBY
REVOKED. RECEIPT OF THE ACCOMPANYING PROXY STATEMENT IS HEREBY ACKNOWLEDGED.
The aforesaid proxies are hereby authorized to vote on any other matter that
may properly come before the meeting at their discretion. An executed proxy may
be revoked at any time prior to its exercise by submitting another proxy with a
later date, by appearing in person at the Bancshares Annual Meeting and advising
the Secretary of the shareholder's intent to vote the share(s) or by sending a
written, signed and dated revocation that clearly identifies the proxy being
revoked to the principal executive offices of Bancshares at 10 East Main Street,
Salineville, Ohio 43945, attention: Tracey L. Reeder, Assistant Corporate
Secretary. A revocation may be in any written form validly signed by the record
holder as long as it clearly states that the proxy previously given is no longer
effective.
Dated:
-----------------------------
-----------------------------
Signature
-----------------------------
Signature
Please sign exactly as your
name appears on your stock
certificate(s) and return
this proxy promptly in the
accompanying envelope. If the
share(s) are issued in the
names of two or more persons,
all persons should sign the
proxy. If the shares are
issued in the name of a
corporation or partnership,
please sign in the corporate
name, by the president or
other authorized officer, or
in the partnership name, by
an authorized person. When
signing as attorney,
executor, administrator,
trustee, guardian or in any
other representative
capacity, please give your
full title as such.
PLEASE DATE, SIGN AND MAIL THIS PROXY TO BANCSHARES, ATTENTION TRACEY L. REEDER,
10 EAST MAIN STREET, SALINEVILLE, OHIO 43945. AN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE.
