CITY NATIONAL BANCSHARES CORPORATION
900 Broad Street
Newark, New Jersey 07102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on Thursday, May 20, 1999
Notice is hereby given that the Annual Meeting of Stockholders of City National
Bancshares Corporation (the "Corporation") will be held at City National Bank of
New Jersey located at 900 Broad Street, Newark, New Jersey, on Thursday, May 20,
1999, at 6:00 p.m. for the following purposes:
1. To elect three (3) directors for a term of three (3) years or until their
respective successors are elected and qualified;
2. To ratify the appointment of KPMG LLP as the Corporation's independent
auditors for the fiscal year ending December 31, 1999; and
Stockholders of record at the close of business on April 22, 1999 are entitled
to notice of and to vote at the meeting.
The Corporation's Proxy Statement and its 1998 Annual Report to Stockholders
accompany this Notice.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IT IS IMPORTANT
THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. ACCORDINGLY, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND THE MEETING, YOU MAY REVOKE
YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By order of the Board of Directors
Lemar C. Whigham
Secretary
Newark, New Jersey
April 23, 1999
CITY NATIONAL BANCSHARES CORPORATION
900 Broad Street
Newark, New Jersey 07102
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1999
Introduction
The enclosed proxy is solicited by and on behalf of the Board of Directors of
City National Bancshares Corporation (the "Corporation") for use at the Annual
Meeting of Stockholders to be held on Thursday, May 20, 1999, at 6:00 p.m., at
City National Bank of New Jersey located at 900 Broad Street, Newark, New Jersey
or at any adjournment thereof.
Voting and Revocability of Proxy
The enclosed proxy is for use at the meeting if you do not attend the meeting,
or if you wish to vote your shares by proxy even if you attend the meeting. You
may revoke your proxy anytime before its exercise by (i) giving written notice
to the Secretary of the Corporation, (ii) submitting a proxy having a later
date, or (iii) appearing at the meeting and requesting to vote in person. Where
a choice or abstention is specified in the form of proxy with respect to a
matter being voted upon, the shares represented by proxy will be voted in
accordance with such specification. If a proxy is signed but no specification is
given, the shares will be voted for the director nominees named herein and in
favor of the other proposal described below.
This Proxy Statement and the enclosed proxy and 1998 Annual Report to
Stockholders are being first mailed to our stockholders on or about April 23,
1999. The Corporation will bear the cost of preparing this Proxy Statement and
of soliciting proxies in the enclosed form. Proxies may be solicited by our
employees, either personally, by letter or by telephone. Such employees will not
be specifically compensated for soliciting said proxies.
Only holders of record of the Corporation's common stock at the close of
business on April 22, 1999 (the "Record Date"), are entitled to notice of, and
to vote at, the meeting. At the close of business on the Record Date, there were
outstanding and entitled to vote, 118,221 shares of common stock, each of which
is entitled to one vote. The presence in person or by proxy of a majority of the
outstanding shares of common stock will constitute a quorum for the purposes of
the meeting.
For purposes of counting votes, abstentions and broker non-votes (i.e., shares
held by brokers that they can't vote because they haven't received voting
instructions from their customers with respect to matters voted on) will be
treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the votes cast
on any matter at the meeting, only "FOR" and "AGAINST" votes are included.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information with respect to each
person known to the Corporation to be a beneficial owner of more than 5% of the
Corporation's common stock as of March 15, 1999. This information is based on
Schedule 13G reports filed with the Securities and Exchange Commission ("SEC")
by each of the persons or entities listed below. If you wish, you may obtain
these reports from the SEC.
Number of Shares Percentage of Total
Name Beneficially Owned Shares Outstanding
- ------------------------------- ------------------ -----------------------
Louis E. Prezeau 18,655(1) 15.53%
900 Broad Street
Newark, NJ 07102
Lemar C. Whigham 9,362(2) 7.79%
34 Mountain Way
West Orange, NJ 07052
Carolyn M. Whigham 8,495 7.07%
11620 Registerstown Rd
Registerstown, MD 21136
Eugene Giscombe 8,170 6.80%
1825 Park Avenue
New York, NY 10035
United Negro College Fund, Inc. 6,800 5.66%
82-60 Willow Oaks Corp. Dr.
Fairfax, VA 22031
- ---------------------------------
(1) Includes unexercised stock options to acquire 1,900 shares of common stock
and 1,133 shares held by his sons, 40 shares held by his daughter and 1,152
shares held by his wife.
(2) Includes 1,000 shares held by his wife.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Corporation is divided into three classes of
approximately equal size. Directors are elected for three-year terms on a
staggered basis, so that the term of office of one class will expire each year
at the annual meeting of stockholders when a successor is elected and qualified
and terms of office of the other classes will extend for additional periods of
one and two years, respectively.
Voting Procedures
Directors are elected by a plurality of votes cast. Shares cannot be voted for a
greater number of persons than the number of nominees named herein. Should any
nominee be unavailable for election by reason of death or other unexpected
occurrence, the enclosed proxy, to the extent permitted by applicable law, may
be voted with discretionary authority in connection with the nomination by the
Board and the election of any substitute nominee. PROXIES, UNLESS INDICATED TO
THE CONTRARY, WILL BE VOTED "FOR" THE ELECTION OF THE THREE (3) NOMINEES NAMED
BELOW TO SERVE FOR A THREE (3) YEAR TERM EXPIRING AT THE 2002 ANNUAL MEETING OF
STOCKHOLDERS.
Douglas E. Anderson, Eugene Giscombe and Louis E. Prezeau, each of whom is
currently serving as a director of the Corporation, are being nominated to serve
as directors with terms expiring at the 2002 Annual Meeting of Stockholders and
until their respective successors are duly elected and qualified.
Information is presented below as of March 15, 1999, as to age, business
experience, the number of shares of the Corporation beneficially owned and the
period during which each director has served on the Board of Directors of the
Corporation and the Board of Directors of City National Bank of New Jersey (the
"Bank"), as well as the number of shares of such common stock beneficially owned
by all directors and executive officers as a group.
Percentage of
Director Term Number Total Shares
Name of Director Age Since Ends Business Experience of Shares Outstanding
- ---------------- --- ---------- ---- --------------------------------- --------- -----------
Douglas E. Anderson 49 1989 1999 Senior Vice President, The Chase 226 *
Manhattan Bank
Barbara Bell Coleman 48 1995 2001 President, BBC Associates, L.L.C. 734 *
Leon Ewing 70 1973 2000 President, Ewing Bonding Agency 2,425(1) 2.02%
Eugene Giscombe 58 1991 1999 President, Giscombe Henderson, Inc. 8,170 6.80%
(property management firm) President, 103
East 125th Street Corporation (property
holding company)
Norman Jeffries 56 1989 2001 Fiscal Manager, Newark Preschool Council, 214 *
Inc.
Louis E. Prezeau 56 1989 1999 President and Chief Executive Officer, 18,655(2) 15.53%
City National Bank of New Jersey and City
National Bancshares Corporation
Lemar C. Whigham 55 1989 2001 President, L & W Enterprises (vending 9,362(3) 7.79%
machine operations)
- ----------------------------- ------- ----------- ------- ------------------------------------------- ------------ ---------------
Directors and executive 43,279 36.03%(4)
officers as a group (9
persons)
- ------------------------
<FN>
(1) Includes 1,875 shares held by Mr. Ewing individually and 550 shares held
jointly with his wife.
(2) Includes unexercised stock options to acquire 1,900 shares of common stock
and 1,133 shares held by his sons, 40 shares held by his daughter and 1,152
shares held by his wife.
(3) Includes 1,000 shares held by his wife.
(4) The number of shares of common stock used in calculating the percentage of
total shares owned includes 118,221 shares of common stock outstanding as
of March 15, 1999 plus 1,900 shares of exercisable options.
</FN>
Meetings of the Board of Directors and Committees
During 1998, the Board of Directors held 12 regular monthly meetings and one
special meeting. A quorum was present at all meetings. No director attended
fewer than 75% of the meetings held by the Board and committees of which such
director was a member.
All directors of the Corporation are also directors of the Bank. Regular
meetings of the Corporation's and the Bank's Boards of Directors are held
monthly. Additional meetings are held when deemed necessary. In addition to
meeting as a group to review the Corporation's business, certain members of the
Board also devote their time and talents to certain standing committees of the
Bank's Board of Directors. These committees, which are described below, serve
similar functions for the Corporation.
The Audit/Examining Committee reviews (i) significant auditing and accounting
matters, (ii) the adequacy of the system of internal controls, and (iii)
examination reports of the internal auditor, regulatory agencies and independent
accountants. Messrs. Jeffries, Ewing and Whigham currently serve as members of
the Committee. Mr. Jeffries serves as Chairperson of the Committee. The
Committee met four times during 1998.
The Loan and Discount Committee reviews all loan policy changes and requests for
policy exceptions and loans approved by management. Messrs. Anderson, Ewing,
Giscombe, Jeffries, Prezeau and Whigham and Ms. Coleman currently serve as
members of the Committee. Mr. Anderson serves as Chairperson of the Committee.
The Committee met 12 times during 1998.
The Investment Committee reviews overall interest rate risk management and all
investment policy changes, along with purchases and sales of investments.
Messrs. Prezeau, Anderson, Ewing, Giscombe and Whigham currently serve as
members of the Committee. Mr. Prezeau serves as Chairperson of the Committee.
The Committee met four times during 1998.
The Personnel/Director and Management Review Committee deals in broad terms with
personnel matters and reviews director and officer compensation. Messrs.
Giscombe, Jeffries, Prezeau, Whigham and Ms. Coleman currently serve as members
of the Committee. Mr. Giscombe serves as Chairperson of the Committee. The
Committee met two times
during 1998.
The Building and Grounds Committee considers branch expansion and matters
concerning Bank premises. Messrs. Ewing, Giscombe, Prezeau and Whigham currently
serve as members of the Committee. Mr. Ewing serves as Chairperson of the
Committee. The Committee did not meet during 1998.
The Marketing Committee oversees the Bank's marketing plan and strategies. Ms.
Coleman and Messrs. Anderson, Giscombe, Prezeau and Whigham currently serve as
members of the Committee. Ms. Coleman serves as Chairperson of the Committee.
The Committee held one meeting during 1998.
Director Compensation
Each director of the Corporation receives an annual retainer of $1,500 and a
$400 fee for each board meeting attended except for the chairperson, who
receives $550, and the secretary, who receives $500. Committee chairpersons
receive $200 for each meeting attended other than the chairperson of the Loan
and Discount Committee, who receives $250 per meeting. Other committee members
receive $150 for each meeting attended, except for Audit Committee members, who
receive $175 for each meeting attended.
Director Retirement Plan
Effective January 1, 1997, the Corporation instituted a director retirement
plan. Under this plan, a director who attains the age of at least 65 and has
completed five years of service on the Board, shall receive an annual benefit
equal to 50% of the aggregate amount of the director's fees paid to such
director during the then last full fiscal year of the Corporation (the "normal
retirement benefit"). This annual benefit is to be paid each year for ten years
beginning on the date the director retires from service on the Board. If the
director ceases service on the Board prior to attaining the age of 65 but after
completing at least five years of service on the Board, the director shall
receive an annual benefit equal to a percentage of the normal retirement benefit
determined under this table.
------------------------ ----------------------
Years Applicable
Of Percentage of Normal
Service Retirement Benefit
------------------------ ----------------------
=> 5 < 7 20%
------------------------ ----------------------
=> 7 < 8 40%
------------------------ ----------------------
=> 8 < 9 60%
------------------------ ----------------------
=> 9 < 10 80%
------------------------ ----------------------
>10 100%
------------------------ ----------------------
Upon a change in control of the Corporation (as defined) followed by a
termination of the director's status as a member of the Board for any reason or
a failure for whatever reason for the director to be nominated and elected to an
immediately succeeding term, the director shall receive a benefit equal to the
present value (discounted at the rate of 4%) of a theoretical series of 120
monthly payments, with each payment equal to 1/12 of the normal retirement
benefit without regard as to whether the director otherwise qualified for the
normal retirement benefit.
If a director dies while in active service on the Board, the designated
beneficiary of such director shall receive the greater of (a) that part of the
normal retirement benefit accrued by the Corporation for such director as of the
date of such director's death (determined based on the formula described above),
and (b) a projected retirement benefit calculated in January 1997 based on the
director's age and assumed increases in director's fees prior to such director
attaining the age of 65. This death benefit is payable to the beneficiary in
monthly installments over ten years.
The Corporation may amend or terminate this plan at any time prior to
termination of service by the director, provided that all benefits accrued by
the Corporation as of the date of such termination or amendment shall be fully
vested; and, provided further, that the plan may not be amended or terminated
after a change of control (as defined) unless the director consents thereto.
THE EXECUTIVE OFFICERS
Listed below is certain information concerning the current executive officers of
the Corporation.
IN OFFICE
NAME AGE SINCE OFFICE AND BUSINESS EXPERIENCE
- ------------------ --- ----- --------------------------------------------------
Louis E. Prezeau 56 1989 President and Chief Executive Officer, City
National Bancshares Corporation and City National
Bank of New Jersey
Stanley Weeks 42 1994 Senior Vice President and Chief Credit Officer,
City National Bank of New Jersey 1984-1994, Vice
President, First Fidelity Bank, N.A.
Edward R. Wright 53 1994 Senior Vice President and Chief Financial Officer,
City National Bancshares Corporation and City
National Bank of New Jersey 1978-1994, Executive
Vice President and Chief Financial Officer, Rock
Financial Corporation
Summary Compensation Table
The following table summarizes compensation for services to the Corporation and
the Bank for the years ended December 31, 1998, 1997 and 1996 paid to or earned
by Mr. Prezeau, the Chief Executive Officer of the Corporation and the Bank. Mr.
Prezeau was the only executive officer of the Corporation whose salary and bonus
exceeded $100,000 for the year ended December 31, 1998.
Annual Compensation Long-Term Compensation
Awards: Payouts:
Securities All Other
Name and Other Underlying Compensation
Principal Position Year Salary Bonus Compensation (1) Options (4)
- -------------------------------------- ------- ------------- ---------- ------------------- --------------- -------------------
Louis E. Prezeau 1998 $150,000 $26,943 $ 8,906 (2) 5700 (3) $ 29,387
President and Chief Executive 1997 137,500 8,177 8,790 (2)
Officer, City National Bancshares 1996 125,000 27,500 6,102 (2)
Corporation and City National Bank
of New Jersey
- -------------------------------------- ------- ------------- ---------- ------------------- --------------- -------------------
<FN>
(1) Perquisites and other personal benefits paid to any named executive officer
did not exceed the lesser of $50,000 or 10% of the annual salary and bonus
reported in the table for that individual and are, therefore, not
presented.
(2) Includes payments made under the Corporation's profit sharing plan of
$5,706, $5,220 and $2,197 in 1998, 1997 and 1996, respectively, and
insurance premiums paid on a life insurance policy on the life of Mr.
Prezeau of $3,200, 3,570 and $3905, in 1998, 1997 and 1996, respectively.
(3) For more information on this grant, see "Prezeau Employment Agreement".
(4) These amounts represent accrual of benefits for Mr. Prezeau under the
Salary Continuation Plan described below.
</FN>
Aggregated Option Exercises During 1998
and Year-End Option Values(1)
- --------------------- -------------- ------------ ----------------------------------- ----------------------------------
Shares Number of Securities Underlying Value of Unexercised
Acquired on Value Unexercised Options Held at In-the-Money Options Held at
Name Exercise Realized December 31, 1998 December 31, 1998
----------------------------------- ----------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- --------------------- -------------- ------------ ---------------- ------------------ -------------- -------------------
Louis E. Prezeau 1900 (2) 0 1900 0 (2)
- ------------------------
<FN>
(1) All options described in this table were granted Mr. Prezeau under his
employment agreement. For more information concerning these options,
see "Prezeau Employment Agreement".
(2) Both Value Realized and Value of the Unexercised Options Held at
December 31, 1998 should represent the difference between the market
value of the stock acquired upon exercise or underlying the unexercised
options, respectively, and the applicable exercise price of such stock
options. Since there is no active trading market for the Corporation's
common stock, any determination of these values would be highly
subjective.
</FN>
Prezeau Employment Agreement
In May 1997, the Bank and the Corporation entered into an employment agreement
with Mr. Prezeau to serve as the President and Chief Executive Officer of both
entities. The agreement is for a term of three years. Under the agreement, Mr.
Prezeau is to receive an annual salary of at least $150,000, subject to
increases in the second and third year of the agreement in the discretion of the
Board. Additionally, Mr. Prezeau is to receive an annual performance bonus equal
to:
10% of the amount of earnings of the Corporation for each year that exceed
10% but are less than 15% of the amount of the Corporation's common
stockholders' equity, plus;
20% of the amount of earnings of the Corporation for such year that exceed
15% of the amount of the Corporation's common stockholders' equity.
The performance bonus shall be paid in cash or common stock of the
Corporation, at the election of Mr. Prezeau.
Under the agreement, Mr. Prezeau was granted an option to purchase up to 5,700
shares of the Corporation's common stock at a price per share of $20. One-third
of the options were immediately vested, one-third of the options vested on May
1, 1998, and the final third of the options will vest on May 1, 1999. If the
Corporation and the Bank do not offer to renew the agreement upon its
termination under terms satisfactory to Mr. Prezeau, or if the Corporation or
the Bank terminates Mr. Prezeau's employment without cause (as defined), then
Mr. Prezeau shall receive a lump sum amount equal to his then current base
salary and a limited continuation of his life and health insurance coverage. If
Mr. Prezeau terminates his employment due to a change in control of the
Corporation (as defined), or if the Bank or the Corporation fail to comply with
their obligations under the agreement or upon the failure of the stockholders of
the Corporation to elect Mr. Prezeau as a director, Mr. Prezeau shall be
entitled to receive liquidated damages and full satisfaction of claims he may
have under the agreement. Mr. Prezeau is also entitled to fringe, medical,
health and life insurance benefits, including life insurance for an amount of up
to three times his base salary then in effect and the use of an automobile.
Salary Continuation Plan
Effective in January 1997, the Corporation and the Bank entered into Agreements
with Messrs. Prezeau and Weeks to encourage each executive to remain as a
employee of the Corporation by agreeing to pay salary continuation benefits to
each executive. Specifically, if the executive's employment with the Corporation
is terminated for whatever reason (other than death) after he attains the age of
65, he will receive an annual benefit equal to 40% of the annual base salary
received by the executive during the last complete fiscal year of his service as
an employee (the "normal retirement benefit"). Such benefit shall be payable to
the executive in equal monthly installments over 15 years. If the executive's
employment with the Corporation is terminated for any reason (other than death)
prior to the executive attaining the age of 65, the executive shall receive the
same benefit payable over the same period of time multiplied by a fraction the
numerator of which is the executive's years of service prior to termination of
employment and the denominator of which is the years of service the executive
would have had had the executive's employment terminated when he was 65.
Upon a change of control of the Corporation (as defined) followed at any time
during the succeeding 12 months by a cessation in the executive's employment for
reasons other than death, disability or retirement, the executive shall receive
a lump sum payment equal to the present value (discounted at the rate of 4%) of
the stream of payments the executive would have received had he qualified for
the normal retirement benefit. If the executive dies while in active service to
the Corporation, the beneficiary of the executive will receive an amount equal
to the greater of that part of the normal retirement benefit accrued by the
Corporation for the executive as of the date of the executive's death or the
projected retirement benefit calculated in January 1997 based on the executive's
age and other assumptions regarding increases in base salary. This death benefit
is payable to the beneficiary in equal monthly installments over 15 years.
As of December 31, 1998, the Corporation had accrued salary continuation
benefits for Mr. Prezeau of $51,271.
Life Insurance Plan
The Bank has a plan which provides Messrs. Prezeau, Weeks and Wright with
certain life insurance benefits. Under the plan, the Bank has purchased life
insurance policies on the lives of each executive and has agreed to provide the
designated beneficiary of each executive with death benefits equal to the lesser
of (i) two times such executive's annual base salary most recent to his death
and (ii) the excess of the total death proceeds under the policy over the cash
surrender value of such policy on the date of death.
- --------------------------------------------------------------------------------
The Board recommends that you vote "FOR" the election of all three (3) nominees
for director.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS
Transactions with Management
Certain directors of the Corporation had loans with the Bank in 1998. These
loans were on substantially the same terms including interest rates and
collateral, as those prevailing at the time for comparable loans with others and
did not involve more than the normal risk of collectibility or present other
unfavorable features. The Bank may have similar transactions in the future.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Corporation's executive officers and directors, and any persons owning ten
percent or more of Corporation's common stock, to file in their personal
capacities initial statements of beneficial ownership, statements of changes in
beneficial ownership and annual statements of beneficial ownership with the SEC.
The rules of the SEC regarding the filing of such statements require that late
filings of such statements be disclosed in the proxy statement. To the best of
management's knowledge, all such statements were timely filed in 1998.
PROPOSAL 2
APPOINTMENT OF INDEPENDENT AUDITORS
The accounting firm of KPMG LLP served as the independent auditors for the
Corporation for the year ended December 31, 1998. Services provided included the
examination of the consolidated financial statements and preparation of the tax
returns.
The Board has appointed KPMG LLP as the independent auditors for the Corporation
and the Bank for 1999. Stockholder ratification of the appointment is not
required under the laws of the State of New Jersey, but the Board has decided to
ascertain the position of the stockholders on the appointment. The Board may
reconsider the appointment if it is not ratified. The affirmative vote of a
majority of the shares voted at the meeting is required for ratification.
- --------------------------------------------------------------------------------
The Board recommends that you vote "FOR" ratification of the Section of KPMG LLP
as independent auditors for 1999.
- --------------------------------------------------------------------------------
Representatives of KPMG LLP are expected to be preset at the meeting and will be
allowed to make a statement if they so desire. Additionally, they will be
available to respond to appropriate questions from stockholders during the
meeting.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals at the 2000 Annual Meeting of
Stockholders must present a written proposal to the Corporation by December 23,
1999, for inclusion in the Corporation's proxy statement.
OTHER MATTERS
Management knows of no other business scheduled for consideration at the
meeting. Should any matter properly come before the meeting or any adjournment
thereof, it is intended that proxies will vote in accordance with their best
judgment.
By order of the Board of Directors
Lemar C. Whigham
Secretary
April 23, 1999