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CITIZENS HOLDING COMPANY
521 MAIN STREET
PHILADELPHIA, MISSISSIPPI 39350
March 22, 2002
Dear Fellow Shareholder:
On behalf of the Board of Directors, we cordially invite you to attend the
2002 Annual Meeting of Shareholders of Citizens Holding Company. The Annual
Meeting will be held beginning at 3:30 p.m. Central time, on Tuesday, April 23,
2002, at the main office of The Citizens Bank of Philadelphia, 521 Main Street,
Philadelphia, Mississippi 39350. The formal notice of the Annual Meeting
appears on the next page.
The Annual Meeting has been called for the following purposes: (1) to set
the number of directors to serve on the board at twelve; (2) to elect four Class
III directors, each for a three-year term; (3) to ratify the Board of Directors'
appointment of the Company's independent accountants for the fiscal year ending
December 31, 2002; and (4) to transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The accompanying proxy statement provides detailed information concerning
the matters to be voted on at the Annual Meeting. We urge you to review this
proxy statement and each of the proposals carefully. Regardless of the number
of shares you own, it is important that your views be represented whether or not
you are able to be present at the Annual Meeting. Please take a moment now to
sign, date and mail the enclosed proxy card in the postage prepaid envelope.
Your Board of Directors recommends a vote "FOR" each proposal.
We are gratified by our shareholders' continued interest in Citizens
Holding Company and are pleased that in the past so many of you have voted your
shares either in person or by proxy. We hope that you will continue to do so
and again urge you to return your proxy card as soon as possible.
Sincerely,
/s/ Steve Webb
Chairman, President and
Chief Executive Officer
CITIZENS HOLDING COMPANY
521 MAIN STREET
PHILADELPHIA, MISSISSIPPI 39350
___________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________
TIME 3:30 p.m., Central time, on Tuesday, April 23, 2002
PLACE The Citizens Bank of Philadelphia
521 Main Street
Philadelphia, Mississippi 39350
ITEMS OF BUSINESS (1) To set the number of directors to serve on the board
at twelve.
(2) To elect four Class III directors who will each
serve a three-year term expiring in 2005.
(3) To consider and act upon a proposal to ratify and
approve the selection of Horne CPA Group as the
company's independent accountants for the fiscal
year ending December 31, 2002.
(4) To transact any other business that may properly
come before the annual meeting or any adjournments
thereof.
RECORD DATE You can vote if you are a shareholder of record as of the
close of business on March 15, 2002.
ANNUAL REPORT Our 2001 annual report, which is not part of the proxy
solicitation material, is enclosed.
PROXY VOTING It is important that your shares be represented and voted
at the annual meeting. Please mark, sign, date and
promptly return the enclosed proxy card in the postage
paid envelope. Any proxy may be revoked at any time prior
to its exercise at the annual meeting.
By Order of the Board of Directors
Carolyn K. McKee
Secretary
Philadelphia, Mississippi
March 22, 2002
TABLE OF CONTENTS
Page
----
BOARD OF DIRECTORS 3
General 3
Meetings and Committees of the Board of Directors 4
Compensation of the Board of Directors 5
PROPOSAL I: NUMBER OF DIRECTORS TO BE ELECTED 6
Vote Required and Board Recommendation 6
PROPOSAL II: ELECTION OF CLASS III DIRECTORS 6
Vote Required and Board Recommendation 7
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 10
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE 10
EXECUTIVE COMPENSATION 11
Stock Options 13
Report on Executive Compensation 14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 15
Indebtedness of Related Parties 15
Interests of the Board of Directors 16
STOCK PERFORMANCE GRAPH 16
PROPOSAL III: APPOINTMENT OF INDEPENDENT ACCOUNTANTS 18
Vote Required and Board Recommendation 18
Report of the Audit Committee 19
PROPOSALS BY SHAREHOLDERS FOR THE 2003 ANNUAL MEETING 19
OTHER MATTERS 20
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K 20
CITIZENS HOLDING COMPANY
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PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, APRIL 23, 2002
This proxy statement is furnished to the shareholders of Citizens Holding
Company, or the company, in connection with the solicitation of proxies by the
board of directors, for use at the annual meeting of shareholders to be held at
3:30 p.m., Central time on Tuesday, April 23, 2002, at the company's main
office, 521 Main Street, Philadelphia, Mississippi 39350, and any adjournments
or postponements. This proxy statement and accompanying proxy card are first
being distributed to our shareholders on or about March 22, 2002.
PROXY SOLICITATION
The board of directors is soliciting the enclosed proxy so that each
shareholder has the opportunity to vote on the proposals presented at the annual
meeting, whether or not the shareholder attends the meeting. When a proxy card
is returned properly signed and dated, the shares represented by the proxy will
be voted in accordance with the instructions on the card at the annual meeting,
including any adjournments or postponements. If the proxy card is signed but no
instructions are given, the shares represented by the proxy will be voted at the
annual meeting and any adjournments or postponements:
(1) "FOR" setting the number of directors to serve on the board at twelve;
(2) "FOR" the election of nominees Willis W. Dungan, George R. Mars,
William M. Mars and Steve Webb as Class III directors; and
(3) "FOR" the approval of the appointment of Horne CPA Group as the
company's independent accountants for the fiscal year ending December
31, 2002.
The proxy card gives the individuals named as proxies discretionary
authority to vote the shares represented by the proxy on any matter other than
the proposals that is properly presented for action at the annual meeting.
A shareholder who gives a proxy may revoke it at any time before it is
voted by giving written notice to the secretary of the company before the annual
meeting, by granting a subsequent proxy or if the shareholder, rather than his
or her broker, is a record holder of our stock, by appearing in person and
voting at the annual meeting.
1
The company generally bears all costs of soliciting proxies. The company
has retained and pays a fee to American Stock Transfer and Trust Company to act
as its registrar and transfer agent and to assist it in the solicitation of
proxies, but the company pays no identifiable compensation for the solicitation
of proxies. Directors, officers and employees of the company, who will receive
no compensation for their services, may solicit proxies by telephone, mail,
facsimile, via the Internet or overnight delivery service.
RECORD DATE AND VOTING RIGHTS
The board of directors has fixed the close of business on Friday, March 15,
2002, as the record date for the annual meeting. Only shareholders of record on
that date are entitled to notice of and to vote at the annual meeting. As of
March 22, 2002, the company's only outstanding class of securities was common
stock, $.20 par value per share. As of March 22, 2002, the company had
22,500,000 shares authorized, of which 4,963,125 shares of common stock were
issued and outstanding.
This proxy provides the opportunity for shareholders to specify approval,
disapproval, or abstention for the following proposals:
(1) A proposal to set the number of directors to serve on the board at
twelve;
(2) The election of four Class III directors to serve until the expiration
of their respective three-year term or until their successors are
elected and qualified; and
(3) The appointment of Horne CPA Group as the company's independent
accountants for the fiscal year ending December 31, 2002.
A majority of the votes entitled to be cast at the annual meeting
constitutes a quorum. A share, once represented for any purpose at the annual
meeting, is deemed present for purposes of determining a quorum for the
remainder of the meeting and for any adjournment, unless a new record date is
set for the adjourned meeting. This is true even if the holder of the share
abstains from voting with respect to any matter brought before the annual
meeting.
Shareholders are entitled to one vote for each share held, which may be
given in person (if the shareholder, rather than his or her broker, is the
record holder of our stock) or by proxy, except that shareholders may cumulate
their votes in the election of directors. Cumulative voting entitles a
shareholder to give one nominee a number of votes equal to the number of
directors to be elected multiplied by the number of shares held by that
shareholder, or to distribute the total votes, computed on the same principle,
among as many nominees for election as directors as the shareholder chooses. For
example, if the number of directors to be elected is four, a shareholder owning
ten shares may cast ten votes for each of four nominees, cast forty votes for
one nominee, or allocate the forty votes among several nominees. Directors are
elected by plurality vote, thus, the candidates receiving the highest number of
votes cast, up to the number of directors to be elected, are elected.
2
For all matters brought before the annual meeting, other than the election
of directors, each proposal or other matter is approved if the votes cast
favoring the proposal or other matter exceed the votes cast opposing the
proposal or other matter.
Under Mississippi law and the company's articles of incorporation and
bylaws, an abstention by a shareholder who is either present in person at the
annual meeting or represented by proxy is not a vote "cast" and is counted
neither "for" nor "against" the matter subject to the abstention. Broker non-
votes on matters are treated as shares as to which voting power has been
withheld by the beneficial holders of those shares and therefore, as shares not
entitled to vote.
BOARD OF DIRECTORS
GENERAL
Below is information concerning the four nominees for election as Class III
directors and the continuing Class I and Class II directors.
CLASS III DIRECTORS AND NOMINEES (TO BE ELECTED AT THE 2002 ANNUAL MEETING,
TERMS OF OFFICE EXPIRE IN 2005)
.. Willis W. Dungan has been a partner of McDaniel Timber Company, a company
primarily engaged in timber land development and sales, and a partner in
DPM, Inc., a company primarily engaged in commercial real estate and
equipment rental, for the past five years. Mr. Dungan, who is 68 years old,
has been a director of the company since 1981 (1).
.. George R. Mars, who is retired, was the proprietor of Mars Department Store
until December 1993. Mr. Mars, who is 62 years old, has been a director of
the company since 1977 (1).
.. William M. Mars has been engaged in the practice of law for the past five
years as a partner of the law firm of Mars, Mars & Mars, P.A. Mr. Mars,
who is 64 years old, has been a director of the company since 1977 (1).
.. Steve Webb has served as President and Chief Executive Officer of the
company since 1978 and Chairman since 1997. Mr. Webb has served as
Chairman and Chief Executive Officer of The Citizens Bank of Philadelphia
since 1997; he had served as President from 1978 until January, 2002. Mr.
Webb, who is 69 years old, has been a director of the company since 1970
(1).
CLASS I DIRECTORS (TERMS OF OFFICE EXPIRE IN 2003)
.. Don L. Fulton has been President and General Manager of Nemanco, Inc., a
company primarily engaged in garment manufacturing, since 1977. Mr.
Fulton, who is 55 years old, has been a director of the company since 1994.
3
.. Donald L. Kilgore, has been engaged in the practice of law for the past
five years as a partner of the law firm of Alford, Thomas and Kilgore. Mr.
Kilgore, who is 52 years old, has been a director of the company since 2001
and is a member of the audit committee.
.. Herbert A. King has served as an engineer with King Engineering, Inc., a
company primarily engaged in general civil engineering and land surveying,
since 1990. Mr. King, who is 50 years old, has been a director of the
company since 1997 and is a member of the audit committee.
.. David P. Webb has been engaged in the practice of law for the past five
years as a partner of the law firm of Phelps Dunbar, L.L.P. Mr. Webb, who
is 42 years old, has been a director of the company since 1998.
CLASS II DIRECTORS (TERMS OF OFFICE EXPIRE IN 2004)
.. M. G. Bond, who is retired, served as a Mississippi State Senator until
1992. Mr. Bond, who is 69 years old, has been a director of the company
since 1986.
.. Karl Brantley has been Plant Manager of U.S. Electrical Motors, a company
primarily engaged in the manufacture of commercial electric motors, since
1982. Mr. Brantley, who is 65 years old, has been a director since 1992
and is a member of the audit committee.
.. David A. King has been the proprietor of Philadelphia Motor Company, a
company primarily engaged in wholesale and retail auto parts sales, since
1977. Mr. King, who is 47 years old has been a director of the company
since 1997.
.. Greg L. McKee has served as President of The Citizens Bank of Philadelphia
since January, 2002; he had served as Executive Vice-President, Senior
Vice-President and Vice President in the five years prior. Mr. McKee, who
is 40 years old, has been a director of the company since 2001.
---------------
(1) This is the year the director was elected to the board of directors of
The Citizens Bank of Philadelphia. These directors were all elected to
the board of the company at the time it was formed in 1982.
There are no family relationships between any director, executive officer
or person nominated to become a director, except that David A. King and Herbert
A. King are brothers and Steve Webb is the father of David P. Webb.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The board meets monthly, generally in a joint session with the board of
directors of The Citizens Bank of Philadelphia, the bank. During the fiscal
year ended December 31, 2001, the board
4
met sixteen times. There were twelve regular monthly meetings and four special
meetings. Each director attended at least 75% of all meetings held by the board
and the committees on which he served. The board, among other things, (1)
approves remuneration arrangements for executive officers of the company, (2)
reviews compensation plans relating to executive officers and directors, (3)
determines other benefits under the company's compensation plans, and (4)
performs general reviews of the company's employee compensation policies. Any
director who also serves as an executive officer of the company or the bank,
does not participate in any board determination regarding salaries and other
compensation for executive officers.
The board has established an audit committee. The board has not formally
established a compensation committee and a nominating committee; however, the
full board generally performs the functions of these committees. The board of
the bank also maintains a trust and loan committee.
Karl Brantley, Donald L. Kilgore, and Herbert A. King are the members of
the audit committee. Each member of the audit committee is an "independent
director" as defined in Section 121(A) of the American Stock Exchange's listing
standards. The audit committee operates under a written charter adopted by the
board of directors on February 22, 2000. The audit committee is responsible for
the review of audit fees, the supervision of matters relating to audit
functions, the review and establishment of internal policies and procedures
regarding audits, accounting and other financial controls, and the review of
related party transactions. The audit committee also recommends to the board of
directors an independent accounting firm to be engaged as the company's
independent auditors. During 2001, the audit committee held three meetings.
COMPENSATION OF THE BOARD OF DIRECTORS
During 2001, each employee and nonemployee director of the company received
a $875 monthly retainer, a $875 year-end bonus and an additional $125 for each
board meeting attended. Directors that serve on the loan committee received an
additional $50 per month and an additional $50 year-end bonus.
The company maintains a stock option plan for the benefit of nonemployee
directors, the 1999 Directors' Stock Compensation Plan. During 2001, each
nonemployee director was granted options to purchase 1,500 shares of common
stock, at an exercise price of $10.83 per share, which is the fair market
value of the stock on the date of grant. The number of shares covered by the
options and the exercise price have been adjusted to give effect to the three-
for-two stock split that occurred on December 14, 2001. As of March 22, 2002,
no director has exercised any options granted under the plan.
Directors of the company and the bank may elect to participate in the
Directors' Deferred Fee Plan maintained by the bank. The plan requires a
participating director to defer all or part of his director fees for a ten-year
period. Benefits are equal to the amount credited to each director's individual
account, including deferred fees and interest at a stated rate based upon the
Moody's Average Corporate Bond Rate. Benefits are generally payable when a
director ceases to serve on the
5
board or attains age 70. The company has elected to purchase individual life
insurance policies to fund its obligation under the plan.
PROPOSAL I: NUMBER OF DIRECTORS TO BE ELECTED
The company's articles of incorporation provide for a board of directors
consisting of not less than nine nor more than twenty-five directors. The
company's shareholders set the actual number of directors to serve on the board
each year at the annual meeting. The board of directors currently consists of
twelve directors divided into three classes, with members of each class elected
for a three-year term. The terms of the three classes are staggered in a manner
so that only one class is elected by the shareholders annually.
A proposal that the number of directors to serve for the ensuing year
remain fixed at twelve will be submitted for vote by the shareholders at the
annual meeting. If this proposal is approved by the affirmative vote of the
holders of a majority of the shares of common stock voted at the annual meeting,
four Class III directors will be elected, each to serve a three year-term. If
this proposal is not approved and the number of directors to serve on the board
is not set by the shareholders at the annual meeting, the number of directors to
serve on the board will remain at twelve as fixed at the 2001 annual meeting and
Four Class III directors will still be elected, each to serve a three-tear term.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote by the holders of a majority of the shares of common
stock voted at the annual meeting is required to approve the proposal to set the
number of directors to serve on the board at twelve.
Shares represented by a properly signed and dated proxy card will be voted
in accordance with the instructions on the card at the annual meeting. If the
proxy card is signed but no instructions are given with respect to setting the
number of directors to serve on the board, the proxy holders will vote the
proxies received by them for setting the number of directors to serve on the
board at twelve.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY RECOMMENDS A VOTE "FOR" SETTING THE
NUMBER OF DIRECTORS TO SERVE ON THE BOARD AT TWELVE.
PROPOSAL II: ELECTION OF CLASS III DIRECTORS
Four Class III directors will be elected at the annual meeting to each
serve a three-year term. The board has nominated Willis W. Dungan, George R.
Mars, William M. Mars and Steve Webb for election as Class III directors to
serve until the 2005 annual meeting or until their successors are duly elected
and qualified. Willis W. Dungan, George R. Mars, William M. Mars and Steve Webb
are currently Class III directors of the company and have been nominated for re-
election as Class III directors.
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VOTE REQUIRED AND BOARD RECOMMENDATION
For the election of directors, shareholders are entitled to four votes for
each share held and may cumulate votes. Directors are elected by plurality
vote. Thus, the four Class III nominees receiving the highest number of votes
cast will be elected to serve as Class III directors.
Shares represented by a properly signed and dated proxy card will be voted
in accordance with the instructions on the card at the annual meeting. If the
proxy card is signed but no instructions are given with respect to the election
of directors, the proxy holders will vote the proxies received by them for the
nominees listed above, and reserve the right to cumulate votes and distribute
them among the nominees, in their discretion. If for any reason one or more of
the nominees named above is not available as a candidate for director, an event
that the board of directors does not anticipate, the proxy holders will vote, in
their discretion for another candidate or candidates nominated by the board. If
shareholders attending the annual meeting cumulate their votes such that all of
the nominees above cannot be elected, the proxy holders will cumulate votes to
elect as many of the nominees listed above as possible.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES FOR CLASS III DIRECTOR OF THE BOARD OF
DIRECTORS.
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SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table sets forth information about all directors, nominees
and named executive officers, as of December 31, 2001, including their name,
position and beneficial ownership. Unless otherwise noted, the named persons
have sole voting and investment power with respect to the shares indicated
(subject to any applicable community property laws).
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-------------------------------------------------
OPTIONS PERCENT
EXERCISABLE OF
NAME POSITION DIRECT WITHIN 60 DAYS OTHER CLASS
---- -------- ------ -------------- ----- -------
M.G. Bond Director 49,627 6,450 1.1%
Karl Brantley Director 15,240 5,550 *
Willis W. Dungan Director 7,200 207,870 (1) 4.3%
Don L. Fulton Director 13,467 5,250 *
Donald L. Kilgore Director 1,500 2,579 (2) *
David A. King Director 72,007 4,800 6,023 (3) 1.7%
Herbert A. King Director 62,340 4,800 299,768 (4) 7.4%
George R. Mars Director 145,297 7,800 56,842 (5) 4.2%
William M. Mars Director 7,800 22,500 (6) *
Greg L. McKee Director; President of the 3,750 2,550 (7) *
bank
David P. Webb Director 18,585 4,650 6,112 (8) *
Steve Webb Chairman, President, CEO 202 8,850 137,655 (9) 3.0%
and Director; Chairman
and CEO of the bank
All directors and 376,765 66,900 741,899 23.6%
executive officers
as a group (12
persons)
---------------
* Less than 1% of the outstanding common stock.
(1) Includes 114,870 shares owned by Mr. Dungan's spouse who exercises sole
voting and investment power with respect to such shares and as to which Mr.
Dungan disclaims beneficial ownership; also includes 93,000 shares held in a
limited
8
partnership of which Mr. Dungan is the managing general partner and as to
which he exercises sole voting and investment power.
(2) Includes 2,579 shares owned jointly with Mr. Kilgore's spouse as to which
Mr. Kilgore shares voting and investment power with his wife.
(3) Includes 1,335 shares owned by Mr. King's spouse who exercises sole voting
and investment power with respect to such shares and as to which Mr. King
disclaims beneficial ownership; also includes 4,688 shares owned by his
children as to which Mr. King shares voting and investment power with his
wife.
(4) Includes 10,912 shares owned jointly with Mr. King's spouse as to which Mr.
King shares voting and investment power with his wife; includes 132,868
owned by his children as to which Mr. King shares voting and investment
power with his wife; also includes 155,988 shares held in trust for his
children as to which Mr. King exercises sole voting power but has no
investment power.
(5) Includes 30,000 shares owned by Mr. Mars' spouse who exercises sole voting
and investment power with respect to such shares and as to which Mr. Mars
disclaims beneficial ownership; also includes 26,842 shares owned by the
estate of Mr. Mars' mother of which he is executor and as to which he
exercises sole voting and investment power.
(6) Includes 22,500 shares owned jointly with Mr. Mars' spouse as to which Mr.
Mars shares voting and investment power with his wife.
(7) Includes 2,550 shares owned jointly with Mr. McKee's spouse as to which Mr.
McKee shares voting and investment power with his wife.
(8) Includes 6,112 shares owned jointly with Mr. Webb's spouse as to which Mr.
Webb shares voting and investment power with his wife.
(9) Includes 255 shares owned by Mr. Webb's spouse who exercises sole voting and
investment power with respect to such shares and as to which Mr. Webb
disclaims beneficial ownership; includes 150 shares owned jointly with Mr.
Webb's spouse as to which Mr. Webb shares voting and investment power with
his wife; also includes 137,250 shares held in a limited partnership of
which Mr. Webb is the managing general partner and as to which he exercises
sole voting and investment power.
9
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of December 31, 2001, each person known
to the company who is a beneficial owner of more than 5% of the outstanding
shares of common stock of the company.
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
------------------- -------------------- -------------------
Herbert A. King 366,908 (1) 7.3%
101 Littlejohn Lane
Starkville, MS 39759
The Molpus Company 388,749 7.7%
502 Valley View Drive
Philadelphia, MS 39350
---------------
(1) Includes 10,912 shares owned jointly with Mr. King's spouse as to which Mr.
King shares voting and investment power with his wife; includes 132,868
owned by his children as to which Mr. King shares voting and investment
power with his wife; includes 155,988 shares held in trust for his children,
for which beneficial ownership is disclaimed; and includes 4,800 shares that
Mr. King could acquire beneficial ownership of by the exercise of stock
options held by Mr. King.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, the company's directors, executive officers, and any person
beneficially owning more than ten percent of the company's common stock are
required to report their initial ownership of the company's common stock and any
subsequent changes in that ownership to the Securities and Exchange Commission.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the company during the 2001 fiscal year, and any Forms 5 and
amendments thereto furnished to the company with respect to the 2001 fiscal
year, and certain written representations made by the company's directors and
officers, the company has determined that all required filings have been made,
except that Willis W. Dungan did not timely report one disposition of common
stock held by a limited partnership in which he is a general partner, and Steve
Webb did not timely report the ownership of shares he beneficially owns jointly
with his spouse. The transaction and the ownership of the shares have been
reflected in subsequent filings made by such individuals.
10
EXECUTIVE COMPENSATION
The following table sets forth compensation information of Steve Webb, the
company's chairman, president and chief executive officer, and Greg L. McKee,
the bank's president and chief operating officer, for services rendered in all
capacities to the company and the bank during the fiscal years ended December
31, 2001, December 31, 2000 and December 31, 1999. The table discloses the
annual salary, bonus and other compensation awards and payouts to Greg L. McKee
and Steve Webb. No other executive officer of the bank or the company received
total annual salary, bonus and other compensation awards and payouts in excess
of $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
---------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS (7)
------------------ ---- -------- ------- ------------ -----------
Steve Webb 2001 $150,000 $35,000 $41,056 (1) 1,500
President and CEO 2000 $145,000 $35,000 $37,427 (2) 1,500
of the company and 1999 $138,000 $35,000 $63,131 (3) 5,700
CEO of the bank
Greg L. McKee 2001 $ 90,000 $12,000 $17,649 (4) 3,000
President and COO 2000 $ 81,000 $ 6,550 $ 7,617 (5) 750
of the bank 1999 $ 75,000 $ 6,750 $ 4,525 (6)
---------------
(1) Represents company matching and profit sharing contributions in the amount
of $11,295 under the Citizens Bank Profit Sharing and Savings Plan, director
fees in the amount of $12,875, split-dollar life insurance premiums paid in
the amount of $8,024, above-market interest earned under the Director's
Deferred Fee Plan in the amount of $7,652 and the value of the use of a
company automobile in the amount of $1,210.
(2) Represents company matching and profit sharing contributions in the amount
of $11,159 under the Citizens Bank Profit Sharing and Savings Plan, director
fees in the amount of $12,825, split-dollar life insurance premiums paid in
the amount of $8,024, above-market interest earned under the Director's
Deferred Fee Plan in the amount of $4,290 and the value of the use of a
company automobile in the amount of $1,129.
(3) Represents company matching and profit sharing contributions in the amount
of $10,536 under the Citizens Bank Profit Sharing and Savings Plan, director
fees in the amount of $11,575, split-dollar life insurance premiums paid in
the amount of
11
$35,785, above-market interest earned under the Director's Deferred Fee Plan
in the amount of $4,118 and the value of the use of a company automobile in
the amount of $1,117.
(4) Represents director fees in the amount of $8,775 and company matching and
profit sharing contributions in the amount of $8,874 under the Citizens Bank
Profit Sharing and Savings Plan.
(5) Represents company matching and profit sharing contributions in the amount
of $7,617 under the Citizens Bank Profit Sharing and Savings Plan.
(6) Represents company matching and profit sharing contributions in the amount
of $4,525 under the Citizens Bank Profit Sharing and Savings Plan.
(7) The number of securities underlying the options have been adjusted to
reflect the three-for-two stock split that occurred on December 14, 2001.
12
STOCK OPTIONS
The company maintains the 1999 Employees' Long-Term Incentive Plan, which
provides for the grant of stock options and restricted stock to employees of the
company and the bank. The company has reserved for grant or issuance under the
plan shares of common stock not to exceed 7% of the company's issued and
outstanding common stock, as determined from time to time, or 347,419 shares as
of December 31, 2001. As of December 31, 2001, grants representing 26,700
shares of the company's common stock have been awarded under the plan.
The following table presents information on the stock option grants that
were made under the plan during the fiscal year ended December 31, 2001 to the
named executive officers of the company and the bank. The number of securities
underlying the options and the per share exercise prices have been adjusted to
reflect the three-for-two stock split that occurred on December 14, 2001.
OPTION GRANTS IN THE FISCAL YEAR ENDED DECEMBER 31, 2001
INDIVIDUAL GRANTS
-------------------------------------------------------- POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF AT ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM (1)
OPTION EMPLOYEES IN OF EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR BASE PRICE DATE 5%($) 10%($)
---- ---------- ------------- ---------- ---------- ------- --------
Steve Webb 1,500 25% $10.83 5/02/2011 $10,216 $25,890
Greg L. McKee 1,500 25% $10.83 5/02/2011 $10,216 $25,890
1,500 25% $11.67 6/27/2011 $11,009 $27,898
---------------
(1) The appreciation rates and potential realizable value do not represent the
company's forecast of possible future appreciation, if any. Actual gains,
if any, are dependent upon the future market price of the company's common
stock and there can be no assurance that the potential amounts will be
achieved.
The following table presents information on the total number and value of
exercisable and unexercisable options held by the named executive officers of
the company and the bank. The number of securities underlying the options and
the value of the unexercised options have been adjusted to reflect the three-
for-two stock split that occurred on December 14, 2001. There were no options
exercised by the named executive officers during 2001.
13
OPTION VALUES AS OF DECEMBER 31, 2001
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AS OF
DECEMBER 31, 2001 (1) DECEMBER 31, 2001 (1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Steve Webb 8,850 $48,498
Greg L. McKee 3,750 $20,768
---------------
(1) The closing price of the company's common stock at December 31, 2001
was $16.60.
REPORT ON EXECUTIVE COMPENSATION
The company has not established a separate compensation committee.
Instead, the board is responsible for setting the compensation of executive
officers, developing executive benefit plans, and establishing other employee
benefit plans or programs for the benefit of the company's executive officers.
Steve Webb and Greg L. McKee, the sole members of the board who are also
employees of the company or the bank, do not participate in determinations
affecting executive compensation, but do make recommendations to the board with
respect to the amount and form of executive compensation.
Determinations of the board are primarily made on the basis of industry and
peer group standards and regional and national economic considerations. The
board relies upon external legal counsel, when needed from time to time, and
upon survey data produced by independent third parties.
The company's executive compensation program consists of three components:
base salary, short-term incentives, and long-term incentives. Currently, the
program emphasizes base salary and short-term incentives. Long-term incentives
that link the performance of the company's common stock and executive
compensation are not significant. Neither the company nor the bank has entered
into employment, retention, change in control or similar agreements with Steve
Webb or any other executive officer.
The board sets base salary at levels somewhat below the average of
regional, competitive peer banks. Base salary is reviewed annually and is
subject to adjustment based upon individual performance and changes in the
regional competitive market. Based upon these standards, the board established
the base salary of Steve Webb, president of the company and the chief executive
officer of company and the bank, at $150,000, and the base salary of Greg L.
McKee, the president of the bank, at $90,000, effective January 1, 2001.
14
Executives and employees are eligible to receive annual bonuses. Such
bonuses are awarded based upon recommendations made to the board by Steve Webb,
subject to approval in the board's discretion. Recommendations are generally
based upon individual performance and the company's performance. There are no
preestablished performance goals or objectives.
The company has established a long-term incentive plan, called the 1999
Employees' Long-Term Incentive Plan, which was first effective as of January 1,
1999. The plan permits the grant of options and restricted stock. During
2001, grants of stock options were made to Mr. Steve Webb and Mr. McKee in
recognition of their service as members of the company's board of directors,
subject to terms and conditions substantially identical to the terms and
conditions of grants made to the company's nonemployee directors under the 1999
Directors' Stock Compensation Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1 million in a taxable year the deduction a company may claim for compensation
paid to its chief executive and four other highest paid officers, unless certain
performance-based conditions are met. The board has reviewed this provision and
does not anticipate the payment of any compensation to an executive officer that
would be affected by the limit.
The board believes that base salary levels and other short and long-term
incentives are reasonable and sufficiently competitive. The board further
believes that the degree of performance sensitivity in the compensation program
is reasonable, taking into consideration the historical practices of the company
and the bank and the interests of its shareholders.
The nonemployee members of the board of directors:
M.G. Bond Karl Brantley Willis W. Dungan
Don L. Fulton Donald L. Kilgore David A. King
Herbert A. King George R. Mars William M. Mars
David P. Webb
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the board of directors who participate in deliberations of
the board of directors concerning executive officer compensation are set forth
above. None of these individuals is a former officer of the company or any of
its subsidiaries.
INDEBTEDNESS OF RELATED PARTIES
Certain directors and officers of the company, businesses with which they
are associated, and members of their immediate families are customers of the
bank and have had transactions with the bank in the ordinary course of the
bank's business. The indebtedness (including unfunded commitments) of the
directors, officers and related parties, to the bank was equal to 2.6% of the
company's shareholders' equity as of December 31, 2001. This indebtedness
comprised 0.5% of the
15
total currently outstanding loans net of unearned interest made by the bank as
of December 31, 2001. In the opinion of the board of directors, such
transactions were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and do
not involve more than the normal risk of collectibility or present other
unfavorable features.
INTERESTS OF THE BOARD OF DIRECTORS
For the past several years, the company has employed the legal services of
Phelps Dunbar LLP, of which Mr. David Webb, a current director of the company
and bank, is a partner. Phelps Dunbar LLP has represented the company in
various legal areas, including tax audits, employee benefits, civil lawsuit
defense and general corporate law. The company expects that the firm will
continue to represent the company in similar matters in the future.
STOCK PERFORMANCE GRAPH
The following performance graph compares the performance of the company's
common stock to the AMEX Market Index and to a peer group of 58 other regional
bank holding companies for the company's reporting period. The graph assumes
that the value of the investment in the company's common stock and each index
was $100 at October 19, 1999 (the date trading of the common stock began on the
American Stock Exchange) and that all dividends were reinvested. All
information relating to the company's common stock in the performance graph has
been adjusted to give effect to the three-for-two stock split of the company's
common stock that occurred on December 14, 2001.
16
PERFORMANCE GRAPH
OCTOBER 19, 1999 - DECEMBER 31, 2001
[GRAPH APPEARS HERE]
10/19/99 12/31/99 12/31/00 12/31/01
Citizens Holding Company $ 100.00 $ 83.38 $ 70.46 $ 106.45
AMEX Market Index $ 100.00 $ 110.59 $ 109.23 $ 112.24
Regional-Southeast Banks(1) $ 100.00 $ 87.42 $ 89.25 $ 104.20
---------------
(1) The bank holding companies included in the peer group are as follows: 20/20
Web Design Inc., Acadiana Bancshares Inc., Admiralty Bancorp CL B, Alabama
National Bancorp, AmSouth Bancorporation, Area Bancshares Corp., Auburn
National Banc Inc., Banc Corporation, Bancorpsouth Inc., Bank of the Ozarks
Inc., Beach First National Bankshares, Britton & Koontz CAP CP, Cardinal
Financial Corp., Centerstate Banks of FL, Chesapeake Financial SHS, Citizens
First Corp., CNB Florida Bankshares, Colonial Bancgroup CL A, Community
Financial GRP, Community First Bancorp, Community Natl., Community Trust
BNCP Inc., Compass Bancshares Inc., Crescent Banking Company, Cumberland
Bancorp, Eastern Virginia Bankshares, Eufaula Banccorp Inc., Exchange
Bancshares, Farmers Capital Bank CP, Fauquier Bancshares Inc., First Capital
Bank, First M&F Corporation, First National Bancshares FL, First Tennessee
Natl. CP, Florida Banks Inc, FNB Corporation (FL), FNB Corporation (VA),
Four Oaks Fincorp, Franklin Financial Corp. TN, Frontier National, Hancock
Holding Co., Heritage Bankshares, Hibernia Corp A, Iberiabank Corporation,
Mid-America Bancorp KY, Midsouth Bancorp, National Commerce FNCL, NB&T
Financial Group, NBC Capital Corporation, Penseco Financial Services Corp.,
Peoples Banctrust Co., The Peoples Holding Co., Pinnacle Bancshares,
Pinnacle Financial PARTN, Premier Financial Bancorp, Regions Financial
Corp., Republic Bancorp Inc. CLA, S.Y. Bancorp Inc., Simmons First Natl.
Corp., South Alabama Bancorp, Southcoast Financial,
17
Southtrust Corp., Trustmark Corp., Union Planters Corp., United Financial
Holding, United Security Bancshares, and Whitney Holding Corp.
Source: Media General Financial Services, Richmond Virginia
PROPOSAL III: APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Horne CPA Group, independent certified public accountants, has served as
auditor of the company since December 31, 1998. The board of directors, upon
recommendation of the audit committee, has appointed Horne CPA Group to serve as
auditor for the fiscal year ending December 31, 2002. Although the appointment
of an independent auditor does not require approval by the shareholders, the
board of directors has chosen to submit its selection for ratification by the
shareholders. The board of directors, however, reserves the right to change
independent auditor at any time, notwithstanding shareholder approval. A
representative of Horne CPA Group is expected to attend the annual meeting. If
present, the representative will have the opportunity to make a statement and
will be available to respond to appropriate questions.
Fees billed by Horne CPA Group for professional services rendered for the
fiscal year ending December 31, 2001 were as follows:
AUDIT FEES - Audit fees of Horne CPA Group for audit of the company's
annual financial statements and the review of those financial statements
included in the company's reports on Form 10-Q are estimated to be $55,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES - Horne
CPA Group did not render any financial information systems design and
implementation services for the company during the fiscal year ending
December 31, 2001.
ALL OTHER FEES - Aggregate fees billed to the company by Horne CPA Group
for all other services rendered for the fiscal year 2001 totaled
approximately $17,000. These fees relate to general consultation and tax
services.
The audit committee has considered the compatibility of these non-audit
services with maintaining Horne CPA Group's independence.
VOTE REQUIRED AND BOARD RECOMMENDATION
The affirmative vote by the holders of a majority of the shares of common
stock voted at the annual meeting is required for the ratification of the
appointment of the independent accountants.
Shares represented by a properly signed and dated proxy card will be voted
in accordance with the instructions on the card at the annual meeting. If the
proxy card is signed but no instructions are given with respect to the
ratification of the appointment of the independent accountants, the
18
proxy holders will vote the proxies received by them for ratification of the
appointment of Horne CPA Group as the company's independent accountants for the
fiscal year 2002.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF HORNE
CPA GROUP AS INDEPENDENT ACCOUNTANTS AND RECOMMENDS A VOTE "FOR" RATIFICATION OF
THE APPOINTMENT OF HORNE CPA GROUP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR
THE FISCAL YEAR 2002.
REPORT OF THE AUDIT COMMITTEE
The audit committee has reviewed and discussed the audited financial
statements with management and Horne CPA Group. The discussions with Horne CPA
Group included the matters required to be discussed by Statement on Auditing
Standards No. 61. In addition, the audit committee received the written
disclosures and the letter regarding independence from Horne CPA Group as
required by Independence Standards Board Standard No. 1 and discussed this
information with representatives of Horne CPA Group.
Based upon the audit committee's review of the audited financial statements
and its discussions with management and Horne CPA Group, the audit committee
recommended to the board of directors that the audited financial statements be
included in the company's annual report on Form 10-K for the fiscal year ended
December 31, 2001, for filing with the Securities and Exchange Commission.
The members of the audit committee:
Karl Brantley
Donald L. Kilgore
Herbert A. King
PROPOSALS BY SHAREHOLDERS FOR THE 2003 ANNUAL MEETING
At the annual meeting each year, the board of directors submits to
shareholders its nominees for election as directors. In addition, the board of
directors may submit other matters to the shareholders for action at the annual
meeting. Shareholders of the company may also submit proposals for inclusion in
the proxy materials. Shareholders intending to submit proposals for
presentation at the 2003 annual meeting and inclusion in the proxy statement and
form of proxy for the annual meeting should forward their proposals to Steve
Webb, President, Citizens Holding Company, 521 Main Street, Philadelphia,
Mississippi 39350. Proposals must be in writing and must be received by the
company prior to November 22, 2002, for inclusion in the company's 2003 proxy
materials. Proposals should be sent to the company by certified mail, return
receipt requested.
Under the bylaws of the company, certain procedures are provided which a
shareholder must follow to introduce any shareholder proposal at a shareholder
meeting or to nominate persons for
19
election as directors. These procedures provide that shareholders desiring to
make nominations of persons for election as directors or to introduce a
shareholder proposal before a meeting must give written notice to the company's
president not less than 14 days or more than 50 days prior to the date of the
meeting at which the proposal is to be acted upon or the election is to be held.
However, if less than 21 days' notice of the meeting is given to shareholders,
such proposal or nomination must be mailed or delivered to the president no
later than the close of business on the seventh day following the day on which
the notice of the meeting was mailed. Proposals and nominations not made in
accordance with this procedure may, in the president's discretion, be
disregarded by the chairman of the meeting, and upon the president's
instructions, the inspectors of election may disregard all votes cast for each
such proposal or nominee.
OTHER MATTERS
Neither the board of directors nor management intend to bring any other
business before the annual meeting other than the matters referred to in the
notice of meeting and this proxy statement. The board of directors is aware that
a shareholder may present a proposal at the annual meeting requesting that the
number of directors to serve on the board of directors be set at thirteen and
nominating a person to serve as a director of the company. If the proposal or
the nomination is properly brought before the annual meeting, or any adjournment
thereof, it is intended that the persons named in the proxy will use their
discretionary authority to vote against the proposal or the nomination or both.
If any other matters are properly brought before the annual meeting, or any
adjournment thereof, the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect to such matters in
accordance with their best judgment.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The annual report to shareholders containing financial statements for the
company's 2001 fiscal year has been mailed to shareholders prior to or with this
proxy statement. However, the annual report does not form any part of the
material for the solicitation of proxies.
Upon the written request of any record holder or beneficial owner of shares
entitled to vote at the annual meeting, the company, without charge, will
provide a copy of the company's annual report for the year ended December 31,
2001 on Form 10-K, as filed with the Securities and Exchange Commission.
Requests should be mailed to Steve Webb, President, Citizens Holding Company,
521 Main Street, Philadelphia, Mississippi 39350.
By Order of the Board of Directors,
March 22, 2002 Steve Webb, Chairman
20
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CITIZENS HOLDING COMPANY
The undersigned does hereby nominate, constitute and appoint STEVE WEBB and
WILLIAM M. MARS, or any of them (each with full power to act alone and with
power of substitution), as their true and lawful attorney, to vote this proxy.
The undersigned also hereby authorizes said individuals to represent the
undersigned, and to vote upon all matters that may properly come before the
Annual Meeting of Shareholders to be held on April 23, 2002, including the
matters described in the Proxy Statement furnished herewith, subject to any
directions indicated on the reverse side, with full power to vote all shares of
Common Stock of Citizens Holding Company held of record by the undersigned on
March 15, 2002, or any adjournment(s) thereof. This proxy shall authorize the
proxies named herein to cumulate all votes which the undersigned is entitled to
cast at the Annual Meeting for, and to allocate such votes among, one or more of
the nominees for director listed on the reverse side as such proxies shall
determine, in their sole and absolute discretion, in order to maximize the
number of such nominees elected to the Company's Board of Directors. I
acknowledge receipt of the Company's notice and accompanying Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL NOS. I AND III
AND "FOR" EACH OF THE NOMINEES FOR CLASS III DIRECTORS.
IMPORTANT- THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
CITIZENS HOLDING COMPANY
APRIL 23, 2002
Please detach and mail in the envelope provided
PROPOSAL NO. I: To set the number of directors to serve on the Board of
Directors at twelve.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL NO. II: To elect four Class III directors.
[ ] FOR all nominees listed at right [ ] WITHHOLD AUTHORITY
(except as marked to the contrary at right) to vote for all nominees
listed at right
Nominees: Willis W. Dungan __________
George R. Mars __________
William M. Mars __________
Steve Webb __________
INSTRUCTIONS: To withhold authority to vote for any individual nominee, check
the box to vote "FOR" all nominees and strike a line through the nominee's name
in the list at right. If you desire to cumulate your votes, please do so in the
blanks following each name.
PROPOSAL NO. III: To ratify the selection of Horne CPA Group as the Company's
independent auditors for the year 2002.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO SPECIFIC DIRECTIONS ARE GIVEN, YOUR
SHARES WILL BE VOTED BY THE INDIVIDUALS DESIGNATED ON THIS PROXY "FOR" THE
NOMINEES FOR CLASS III DIRECTORS AND "FOR" PROPOSAL NOS. I AND III. THE
INDIVIDUALS DESIGNATED ON THIS PROXY WILL VOTE IN THEIR DISCRETION ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature of Shareholder:
-------------------------------------
Signature if held jointly:
------------------------------------
Date: , 2002
---------------------------------------------------
NOTE: Please sign name exactly as name appears on the certificate or
certificates representing shares to be voted by this proxy as shown on the label
above. When signing as executor, administrator, attorney, trustee, or guardian
please give full title as such. If a corporation, please sign full corporation
name by president or other authorized officer. If a partnership, please sign in
partnership name by authorized person(s).
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.