SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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Citizens Holding Company
----------------------------------------------
(Name of Registrant As Specified In Its Charter)
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Citizens Holding Company
521 Main Street
Philadelphia, Mississippi 39350
March 29, 2001
Dear Fellow Shareholder:
On behalf of the Board of Directors, we cordially invite you to attend the
2001 Annual Meeting of Shareholders of Citizens Holding Company. The Annual
Meeting will be held beginning at 3:30 p.m. Central time, on Tuesday, May 1,
2001, 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 of Directors at twelve; (2) to
elect up to four Class II directors each for a three-year term; (3) to elect one
Class I director for a two-year term; (4) to ratify the Board of Directors'
appointment of the Company's independent accountants for the fiscal year ending
December 31, 2001; (5) to consider a shareholder proposal, if properly brought
before the Annual Meeting; and (6) 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 that you vote "FOR" the ratification of
the appointment of the Company's independent accountants for the fiscal year
ending December 31, 2001, "FOR" setting the number of directors to serve on the
board at twelve, "FOR" the election of nominees M. G. Bond, Karl Brantley, David
A. King and Greg L. McKee as Class II directors and "FOR" the election of
nominee Donald L. Kilgore as a Class I director.
This year you are also being asked to consider a shareholder proposal. The
Board of Directors believes that this proposal could prejudice your financial
interests and is not in the best long-term interests of the Company's
shareholders. Accordingly, your Board of Directors recommends that you vote
"AGAINST" approval of the shareholder 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, May 1, 2001
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 up to four Class II directors who will each serve a
three-year term expiring in 2004.
(3) To elect one Class I director who will serve a two-year term
expiring in 2003.
(4) 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, 2001.
(5) To consider a shareholder proposal, if properly brought before
the annual meeting.
(6) 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 27, 2001.
ANNUAL REPORT...... Our 2000 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 29, 2001
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.......................................... 4
PROPOSAL I: NUMBER OF DIRECTORS TO BE ELECTED........................................ 5
Vote Required and Board Recommendation.......................................... 5
PROPOSAL II: ELECTION OF CLASS II DIRECTORS......................................... 5
Vote Required and Board Recommendation.......................................... 6
PROPOSAL III: ELECTION OF CLASS I DIRECTORS......................................... 6
Vote Required and Board Recommendation.......................................... 6
SECURITY OWNERSHIP OF DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS..................... 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...................................... 8
Indebtedness of Related Parties................................................. 9
Interests of the Board of Directors............................................. 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.............................. 9
EXECUTIVE COMPENSATION............................................................... 10
Stock Options................................................................... 11
Report on Executive Compensation................................................ 11
Stock Performance Graph......................................................... 13
PROPOSAL IV: APPOINTMENT OF INDEPENDENT ACCOUNTANTS................................. 14
Vote Required and Board Recommendation.......................................... 14
Report of the Audit Committee................................................... 14
PROPOSAL V: SHAREHOLDER PROPOSAL.................................................... 15
Shareholder Proposal............................................................ 15
Shareholder's Supporting Statement.............................................. 15
Statement of the Board of Directors in Opposition to the Shareholder Proposal.. 16
Vote Required and Board Recommendation.......................................... 17
PROPOSALS BY SHAREHOLDERS FOR THE 2002 ANNUAL MEETING................................ 18
OTHER MATTERS........................................................................ 18
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K........................................... 18
APPENDIX A........................................................................... 19
CITIZENS HOLDING COMPANY
_______________
PROXY STATEMENT
_______________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD TUESDAY, MAY 1, 2001
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, May 1, 2001, 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 being
distributed on or about March 29, 2001.
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 M. G. Bond, Karl Brantley, David A. King
and Greg L. McKee as Class II directors;
(3) "FOR" the election of nominee Donald L. Kilgore as a Class I director.
(4) "FOR" the approval of the appointment of Horne CPA Group as the
company's independent accountants for the fiscal year ending December
31, 2001; and
(5) "AGAINST" the approval of the shareholder proposal, if properly brought
before the shareholder meeting.
Management is not aware of any matters, other than these proposals, that
will be considered at the annual meeting. 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 notice, in writing, to the secretary of the company, by granting
a subsequent proxy, or by appearing in person and voting at the annual meeting.
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 Tuesday, March
27, 2001, 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 27, 2001, the company's only outstanding class of securities was common
stock, $.20 par value per share. As of March 27, 2001, the company had
15,000,000 shares authorized, of which 3,308,750 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 up to four Class II directors to serve until the
expiration of the applicable three-year term or until their successors
are elected and qualified;
(3) The election of one Class I director to serve until the expiration of
the applicable two-year term or until his or her successor is elected
and qualified;
(4) The appointment of Horne CPA Group as the company's independent
accountants for the fiscal year ending December 31, 2001; and
(5) A shareholder proposal, if properly brought before the annual meeting.
A majority of the votes entitled to be cast at the annual meeting
constitute 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 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 in
each class 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 of each class as the shareholder chooses. For
example, if the number of directors to be elected in a class 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.
The candidates receiving the highest number of votes cast, up to the number of
directors to be elected in each class, are elected.
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.
2
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 II
directors, the nominee for election as a Class I director and the continuing
Class I and Class III directors.
Class II Directors and Nominees (to be elected at the 2001 Annual Meeting; terms
of office expire in 2004)
. M. G. Bond, director and nominee. Age 68, residing at 412 North Saint
Matthews St., Carthage, Mississippi 39051. Board member since 1986.
Retired, Mississippi State Senator.
. Karl Brantley, director and nominee. Age 64, residing at 535 Dr. Brantley
Road, Madden, Mississippi 39109. Board member since 1992. Plant Manager,
U. S. Electrical Motors.
. David A. King, director and nominee. Age 46, residing at 1006 Edgewater
Drive, Philadelphia, Mississippi 39350. Board member since 1997.
Proprietor, Philadelphia Motor Company.
. Greg L. McKee, nominee. Age 39, residing at 11360 Highway 16 East,
Philadelphia, Mississippi 39350. Executive Vice President, The Citizens
Bank of Philadelphia.
Class I Directors and Nominee (terms of office expire in 2003)
. Don L. Fulton, director. Age 54, residing at 207 Woodbriar Lane,
Philadelphia, Mississippi 39350. Board member since 1994. President and
General Manager, Nemanco, Inc.
. Herbert A. King, director. Age 49, residing at 101 Littlejohn Lane,
Starkville, Mississippi 39759. Board member since 1997. Engineer, King
Engineering, Inc.
. David P. Webb, director. Age 41, residing at 613 Inglenook Court, Madison,
Mississippi 39110. Board member since 1998. Attorney, Phelps Dunbar,
L.L.P.
. Donald L. Kilgore, nominee. Age 51, residing at 730 Forest Park Circle,
Philadelphia, Mississippi 39350. Attorney, Alford, Thomas and Kilgore.
Class III Directors (terms of office expire 2002)
. George R. Mars, director. Age 61, residing at 304 Azalea Drive,
Philadelphia, Mississippi 39350. Board member since 1977(1). Retired
Proprietor, Mars Department Store.
. William M. Mars, director. Age 63, residing at Route 1, Box 204,
Philadelphia, Mississippi 39350. Board member since 1977(1). Attorney,
Mars, Mars & Mars, Attorneys.
3
. W. W. Dungan, director. Age 67, residing at P.O. Box 686, Philadelphia,
Mississippi 39350. Board member since 1981(1). Partner, McDaniel Timber
Company. Partner, DDM, Inc.
. Steve Webb, director. Age 68, residing at 534 Poplar Ave., Philadelphia,
Mississippi 39350. Board member since 1970(1). Chairman, President and
CEO, Citizens Holding Company and The Citizens Bank of Philadelphia.
(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 Steve Webb, the chairman
of the board, president and chief executive officer of the company, is the
father of David P. Webb, a member of the board of directors.
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, 2000, the board met twelve times. There were twelve regular
monthly meetings and no 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, William M. Mars, and Herbert A. King are 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, a copy of which is included as Appendix A to
this proxy statement. 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
2000, the audit committee held three meetings.
Compensation of the Board of Directors
During 2000, all directors of the company, including Steve Webb, the sole
employee director, received a $825 monthly retainer, a $825 year-end bonus and
an additional $125 for each board meeting attended. Directors that serve on the
Director's Loan Committee received an additional $50 per month.
4
The company maintains a stock option plan for the benefit of nonemployee
directors, the 1999 Directors' Stock Compensation Plan. During 2000, each
nonemployee director was granted options to purchase 1,000 shares of common
stock, at an exercise price of $16.50 per share, which was the fair market value
of the stock on the date of grant. As of March 27, 2001, 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 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 such number of directors, not less than nine or more than twenty-
five, as fixed by the shareholders at each annual meeting. The company's board
currently consists of ten directors, and the board proposes to increase the size
of the board to twelve directors. The board of directors is divided into three
classes, with members of each class elected for a three-year term. Currently,
Class I and Class II each consist of three directors and Class III consists of
four directors. Fixing the number of directors on the board at twelve will
equalize the number of directors in each class at four per class.
If this proposal is adopted by the affirmative vote by the holders of a
majority of the shares of common stock voted at the annual meeting, four Class
II directors will be elected each to serve a three-year term and one Class I
director will be elected to serve a two-year term. If this proposal is not
adopted, the number of directors of the company will remain at ten directors. As
a result, only three Class II directors will be elected at the annual meeting to
each serve a three-year term as set forth in the company's articles of
incorporation.
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 set the number of directors to
serve on the board at twelve.
The company's board of directors unanimously recommends a vote "FOR"
setting the number of directors to serve on the board at twelve.
PROPOSAL II: ELECTION OF CLASS II DIRECTORS
If the number of directors to serve on the board is set at twelve, four
Class II directors will be elected at the annual meeting to each serve a three-
year term. The board has nominated M. G. Bond, Karl Brantley, David A. King and
Greg L. McKee for election as Class II directors to serve until the 2004 annual
meeting or until their successors are duly elected and qualified. If the number
of directors to serve on the board is not set at twelve, the nomination of Greg
L. McKee will be withdrawn and the number of directors will remain at ten. Under
those circumstances, three Class II directors will be elected at the annual
meeting. M. G. Bond, Karl Brantley and David A. King are currently Class II
directors of the company and have been nominated for re-election as Class II
directors.
5
Vote Required and Board Recommendation
Shareholders are entitled to one vote for each share held and may cumulate
votes in the election of directors. If the number of directors to serve on the
board is fixed at twelve, the four Class II nominees receiving the highest
number of votes cast will be elected to serve as Class II directors. If the
number of directors to serve on the board is not set at twelve, the number of
Class II directors to be elected at the annual meeting shall remain at three
Class II directors and the three Class II nominees receiving the highest number
of votes cast will be elected to serve as Class II directors.
Unless a shareholder expressly withholds authority on a proxy card, 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 II director of the Board of
Directors.
PROPOSAL III: ELECTION OF CLASS I DIRECTORS
If the number of directors to serve on the board is set at twelve, one
Class I director will be elected at the annual meeting to serve a two-year term.
The board has nominated Donald L. Kilgore for election as Class I director to
serve until the 2003 annual meeting or until his successor is duly elected and
qualified. If the number of directors to serve on the board is not set at
twelve, the nomination of Donald L. Kilgore will be withdrawn and no Class I
director will be elected at the annual meeting.
Vote Required and Board Recommendation
Shareholders are entitled to one vote for each share held and may cumulate
votes in the election of directors. If the number of directors to serve on the
board is fixed at twelve, the Class I nominee receiving the highest number of
votes cast will be elected to serve as a Class I director. If the number of
directors to serve on the board is not set at twelve, no Class I director will
be elected at the annual meeting and the nomination of Donald L. Kilgore will be
withdrawn.
Unless a shareholder expressly withholds authority on a proxy card, the
proxy holders will vote the proxies received by them for the nominee listed
above. If for any reason the nominee 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 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 Donald L. Kilgore as a class I director of the Board of Directors.
6
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, 2000, 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 33,085 3,300 1.1%
Karl Brantley Director 10,160 2,700 *
W. W. Dungan Director 3,800 138,620(1) 4.3%
Don L. Fulton Director 6,250 2,500 *
Donald L. Kilgore Nominee 1,667(2) *
David A. King Director 48,005 2,200 4,016(3) 1.6%
Herbert A. King Director 41,560 2,200 197,455(4) 7.3%
George R. Mars Director 105,965 4,200 65,745(5) 5.3%
William M. Mars Director 8,950 4,200 3,785(6) *
Greg L. McKee Nominee 500 1,700(7) *
David P. Webb Director 16,075 2,100 *
Steve Webb Chairman, President, 135 4,800 90,570(8) 2.9%
CEO and Director
All directors, nominees 270,185 32,500 503,558 24.1%
and executive officers
as a group (12 persons)
*Less than 1% of the outstanding common stock.
(1) Includes 65,620 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 73,000 shares held in a limited partnership of which Mr.
Dungan is the managing general partner and as to which he
exercises sole voting and investment power .
(2) Includes 1,667 shares owned jointly with Mr. Kilgore's spouse as
to which Mr. Kilgore shares voting and investment power with his
wife.
7
(3) Includes 890 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 3,126
shares owned by his children as to which Mr. King shares voting
and investment power with his wife.
(4) Includes 7,275 shares owned jointly with Mr. King's spouse as to
which Mr. King shares voting and investment power with his wife;
includes 42,920 owned by his children as to which Mr. King shares
voting and investment power with his wife; also includes 149,260
shares held in trust for his children as to which Mr. King
exercises sole voting power but has no investment power.
(5) Includes 20,000 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
45,745 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 3,785 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.
(7) Includes 1,700 shares owned jointly with Mr. McKee's spouse as to
which Mr. McKee shares voting and investment power with his wife.
(8) Includes 170 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; also includes
90,400 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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth as of December 31, 2000, each person known
to the company who is a beneficial owner of more than 5% of the outstanding
shares of common stock.
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENTAGE OF CLASS
------------------- -------------------- -------------------
Herbert A. King 241,215 (1) 7.3%
101 Littlejohn Lane
Starkville, MS 39759
George R. Mars 175,910 (2) 5.3%
304 Azalea Drive
Philadelphia, MS 39350
The Molpus Company 259,166 7.8%
502 Valley View Drive
Philadelphia, MS 39350
8
(1) Includes 7,275 shares owned jointly with Mr. King's spouse as to which
Mr. King shares voting and investment power with his wife; includes
42,920 owned by his children as to which Mr. King shares voting and
investment power with his wife; includes 149,260 shares held in trust
for his children, for which beneficial ownership is disclaimed; also
includes 2,200 shares that currently could be purchased by the exercise
of options held by Mr. King.
(2) Includes 20,000 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; includes 45,745 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; also includes
4,200 shares that currently could be purchased by the exercise of
options held by Mr. Mars.
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 2.20% of the
company's shareholders' equity at December 31, 2000. This indebtedness comprised
0.38% of the total currently outstanding loans net of unearned interest made by
the bank as of December 31, 2000. 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.
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 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.
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 fiscal 2000, and any Forms 5 and amendments
thereto furnished to the company with respect to fiscal 2000, 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 Mr.
George R. Mars did not timely report three separate dispositions of common stock
directly owned by him, Mr. W. W. Dungan did not timely report a disposition of
common stock held by a limited partnership in which he is the managing general
partner, Mr. David A. King did not timely report common stock held by a limited
partnership in which he is a general partner, Mr. Herbert A. King did not timely
report common stock
9
held by two separate limited partnerships in which he is a general partner and
Mr. David Webb did not timely report common stock held by a limited partnership
in which he is a general partner. These transactions have been reflected in
subsequent filings made by such individuals.
EXECUTIVE COMPENSATION
The following table sets forth compensation information of Steve Webb, the
company's chairman, president and chief executive officer, for services rendered
in all capacities to the company and the bank during the fiscal years ended
December 31, 2000, December 31, 1999 and December 31, 1998. The table discloses
the annual salary, bonus and other compensation awards and payouts to Steve
Webb.
Summary Compensation Table
Annual Compensation
-------------------------
Name and All Other
Principal Position Year Salary Bonus Compensation
------------------ ---- -------- ------- ------------
Steve Webb(1) 2000 $145,000 $35,000 $37,427(2)
President and CEO of the
company and the bank 1999 $138,000 $35,000 $63,131(3)
1998 $132,000 $30,000 $47,794(4)
(1) No other executive officer received total annual salary and bonus
exceeding $100,000.
(2) Represents company matching and profit sharing contributions 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 Citizens Holding Company Deferred Compensation 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 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 $35,785, above-market interest earned
under the Citizens Holding Company Deferred Compensation 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 company matching and profit sharing contributions of
$13,151 under The Citizens Bank Profit Sharing and Savings Plan,
director fees in the amount of $10,925, split-dollar life insurance
premiums paid in the amount of $18,341, above-market interest earned
under the Citizens Holding Company Deferred Compensation Plan in the
amount of $4,295 and the value of the use of a company automobile in
the amount of $1,082.
10
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 231,613 shares as
of December 31, 2000.
During 2000, the company made a single grant to Steve Webb. Mr. Webb was
granted incentive stock options to acquire 1,000 shares of the company's common
stock. The grant to Mr. Webb represented 9.6% of the total options granted to
employees of the company in 2000 under the plan. The exercise price of the
options was $16.50, the fair market value of the stock on the date of grant. The
options first became exercisable on October 27, 2000, and expire on April 26,
2010. The potential realizable value of the grant at annual rates of stock price
appreciation for the term of the option is $10,377 at 5% and $26,297 at 10%. 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.
There were no options exercised by executive officers during 2000.
As of December 31, 2000, all of Mr. Webb's options were exercisable and no
other executive officers of the company held exercisable or unexercisable
options. As of December 31, 2000, Mr. Webb held exercisable options representing
4,900 shares of common stock with an aggregate value of $24,064, based upon a
stock price of $17.00.
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, the sole member of the board who is also an employee of the company, does
not participate in determinations affecting his individual compensation, but
does make recommendations to the board with respect to the amount and form of
his 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, 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
11
base salary of Steve Webb, president and chief executive officer of the company
and the bank, at $145,000, effective January 1, 2000, providing an annualized
increase of 5%.
Executives and employees annually receive cash incentives (bonuses). Annual
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 Citizens
Holding Company 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 2000, a grant was made in recognition of his service as a member
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 Directors' 1999 Stock Compensation
Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 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:
Don L. Fulton David A. King Herbert A. King
George R. Mars David P. Webb William M. Mars
M.G. Bond Willis W. Dungan Karl Brantley
12
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.
Performance Graph
October 19, 1999 - December 31, 2000
[GRAPHIC]
_______________________________
10/19/99 12/31/99 12/31/00
Citizens Holding Company $ 100.00 $ 83.38 $ 70.46
AMEX Market Index $ 100.00 $ 110.59 $ 109.23
Regional-Southeast Banks(1) $ 100.00 $ 87.42 $ 89.25
(1) The bank holding companies included in the peer group are as follows:
1st National Bancshares, 20/20 Web Design, 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, Britton &
Koontz CAP CP, Cardinal Financial Corp, Chesapeake Financial SHS, CNB
Florida Bankshares, Colonial Bancgroup CL A, Community Financial GRP,
Community Trust BNCP Inc, Compass Bancshares Inc, Crescent Banking
Company, Eastern Virginia Bankshares, Eufaula Banccorp Inc, Exchange
Bancshares, Farmers Capital Bank CP, Fauquier Bancshares Inc., First
Capital Bank, First M&F Corporation, First Tennessee Natl CP, First
United Bancshares, Florida Banks Inc, FNB Corporation (VA), Four Oaks
Fincorp, Frontier National, Hancock Holding Co, Heritage Bankshares,
Hibernia Corp A, Iberiabank Corporation, Intercounty Bankshares, Lamar
Capital Corp, Mid-America Bancorp KY, Midsouth Bancorp, National
Commerce Bancorp, Penseco Financial Services Corp, Peoples Banctrust
Co, The Peoples Holding Co, Premier Financial Bancorp, Regions
Financial Corp, Republic Bancorp Inc CLA, S.Y. Bancorp Inc, Simmons
First Natl Corp, South Alabama Bancorp, Southcoast Financial,
Southtrust
13
Corp, Trustmark Corp, Union Planters Corp, United Financial Holding,
United Security Bancshares, and Whitney Holding Corp.
Source: Media General Financial Services, Richmond Virginia
PROPOSAL IV: 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, proposes to continue the firm's services
as auditor for the fiscal year ending December 31, 2001. 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, 2000 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 $53,000.
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, 2000.
All Other Fees - Aggregate fees billed to the company by Horne CPA Group
for all other services rendered for the fiscal year 2000 totaled
approximately $15,000. 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.
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 2001.
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
14
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, 2000, for filing with the Securities and Exchange Commission.
The members of the audit committee:
Karl Brantley
Herbert A. King
William M. Mars
PROPOSAL V: SHAREHOLDER PROPOSAL
The company has been notified that a shareholder of common stock intends to
present the following proposal and supporting statement for consideration at the
annual meeting. The name, address and stock ownership of the proponent will be
furnished by the company to any person promptly upon receipt of an oral or
written request.
Shareholder Proposal
RESOLVED, that the stockholders of Citizen's Holding Company (the
"Company"), believing that the value of their investment can best be maximized
through the sale or merger of the Company, hereby request that the Board of
Directors promptly proceed to effect such sale or merger by (i) retaining a
leading investment banking firm for the specific purpose of soliciting offers to
acquire the Company by sale or merger and (ii) establishing a committee of the
Board of Directors consisting of all Directors, who are not current or former
officers or employees of the Company or related by blood or marriage to a
current or former officer or employee of the Company, to consider and recommend
to the full Board of Directors for approval the best available offer to acquire
the Company by sale or merger.
Shareholder's Supporting Statement
Citizen's Holding Company began trading at $27/share on October 19, 1999
and has steadily fallen to its current (November 2000) level of under $17/share,
a decline of 37%. During this time (to November 1, 2000) the Dow rose 6.8%. The
S&P 500 rose 12.7% and the NASDAQ Bank Index was flat. Citizen's has
underperformed its peer group (the NASDAQ Bank Index) and broader market
averages. This poor performance has occurred despite efficient and profitable
operations, increasing earnings and increased dividends to shareholders. The
bank's market has enjoyed a strong economy. Management has had more than year to
bring our bank to the investment community's attention. We shareholders should
expect better financial performance.
I believe that the only reasonable way for management to deliver maximum
return to shareholders is to undertake a sale of the bank to a larger financial
institution. Between 1/1/99 and 11/01/00 the average price to book value
ratio/(1)/ for all bank acquisitions of Citizens' approximate size in the
Southeast was 286%/(2)/, twice Citizen's current Price: Book Value ratio of
136%./(3)/ I believe acquisition by a larger bank would reduce the geographic
risk we Citizen's shareholders currently face
15
with operations in relatively small area with a few key industries. I believe
the shares in a larger bank we would likely receive in trade would be more
likely to rebound with bank shares in general than a thinly traded stock such as
CIZ. I believe a well-chosen acquirer would have similar Returns on Equity and
growth in Earnings per Share and shareholders could expect similar long-term
growth prospects in addition to an immediate jump in share value. The expansion
plans of the Mississippi Band of Choctaw Indians make this a good time to market
our company. I ask you to vote "For" this proposal and the best interests of all
CIZ shareholders.
(1) The ratio of a company's share price to its book value.
(2) SNL Securities DataSource, Charlottesville, VA; acquired banks $250
million-$1 billion assets in Alabama, Arkansas, Mississippi, Georgia,
Tennessee and Louisiana.
(3) CIZ = $17/share, 11/01/00: Book Value = $12.48/share, 10/30/00; SEC
10-Q 3rd QTR 00 Citizens Holding Company.
Statement of the Board of Directors in Opposition to the Shareholder Proposal
The board of directors of the company has reviewed the proposal and the
supporting statement brought forward by the proponent and unanimously recommends
that you vote "AGAINST" this proposal for the following reasons:
The board strongly believes that adoption of the proposal is not in the
best long-term interests of shareholders. In the board's opinion, the proponent
is pursuing a short-term agenda, without regard to the long-term interests of
the company or the other shareholders, which will not maximize shareholder
value. While we recognize that the proposal only requests certain action of the
board and does not obligate the board to take any action, the board believes an
announcement that the proposal has been adopted could severely damage the
company's long-term relationships with its customers. Moreover, the board
believes the company may have difficulty retaining employees and attracting new
employees if the proposal is adopted. The board also believes this could
adversely impact the company's ability to effectively compete in the short and
long-term, resulting in a possible decline in revenues and a corresponding
decline in shareholder value. Furthermore, the proponent's actions have already
resulted in the company incurring expenses and diverting resources that could
have been put to better use.
The board believes that the proponent's comparison of the company's current
stock price with certain historical acquisition data provided by SNL Securities
DataSource in his supporting statement is misleading to the extent that it uses
information that is stale and does not reflect current acquisition trends. The
acquisition data used in the proponent's supporting statement is based on seven
transactions, of which five occurred in 1999 and two occurred in 2000. The last
transaction used by the proponent in this comparison was completed on August 23,
2000, and the price to book value ratio reported by SNL Securities DataSource
was only 159%. The company believes that the acquisition climate has changed
greatly in the last two years and further believes that the price to book value
ratios during that period have declined.
The board of directors is committed to maximizing value for shareholders
and to pursuing a course of action that will, in the board's judgment, best
achieve that objective. As such, the board reviews on a regular basis its
strategic plan to evaluate alternatives and opportunities available to the
company in furtherance of maximizing shareholder value. To date, the board's
efforts to enhance shareholder value have focused on internal growth, growth
through the acquisition of existing bank branches and the establishment of new
branches, investment in technology, and increasing shareholder dividends.
16
The board believes that shareholder value can be enhanced through
acquisitions that are complementary to the company's business and has considered
such acquisitions in the past. The board also believes that shareholder value
can also be enhanced through the upgrade of existing facilities and the
establishment of new bank branch locations. To that end, the company recently
has established a new bank branch location in Meridian, Mississippi and has
upgraded facilities at three branch locations.
The company has taken steps to increase its non-interest income through the
purchase of interests in a credit life insurance company and a title insurance
company and has acquired a mortgage company. In addition, the company has made
significant investments in technology and has recently upgraded its computer
equipment and software, established a web-site on the Internet, and developed
its own credit card program, debit/ATM card program, phone teller system and
Internet banking program. The board believes that the company's investments in
technology will enhance the company's competitive position, allowing it to adapt
more quickly to future innovation, assimilate internal growth and external
growth resulting from acquisitions of branch locations and other banks, and
incorporate future products more efficiently.
Another significant part of the company's strategic plan, increasing
shareholder dividends, is generating immediate returns for shareholders.
Dividends paid to shareholders in 1999 and 2000 have increased 33.33% and
32.81%, respectively, compared to the dividends paid in the previous year. See
the Market Price and Dividend Information table included in the 2000 Annual
Report to Shareholders. In addition, the company has recently implemented a
dividend reinvestment plan for its shareholders.
The board is committed to considering all options available to the company
for enhancing shareholder value, including potential mergers or other business
combination transactions. The board and management recognize that the banking
industry is in the process of undergoing tremendous change, and they intend to
remain attuned to the marketplace so that the company's shareholders benefit
fully from the opportunities for growth in shareholder value that the future
will provide. The board will review responsibly any offer for a combination with
the company and will exercise its business judgment to determine whether to
accept such an offer. The board believes that the purpose of the proposal is to
force the board to sell the company to a third party as soon as possible. The
board does not believe that adopting the proposal and in effect placing a "for
sale" sign on the company or putting the company on the "auction block" is
likely to result in the maximization of shareholder value.
The board of directors remains committed to maximizing shareholder value
through all available means and believes that the actions it has taken will
continue to benefit shareholders. The board and management's goals are aligned
with yours, as evidenced by director and officer ownership in excess of 20% of
the company's stock. See the Security Ownership of Directors and Executive
Officers table. The board believes that the company is well positioned to
deliver exceptional shareholder value.
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 approval of this proposal.
After careful review and consideration, the board of directors unanimously
recommends a vote "AGAINST" approval of this proposal.
17
PROPOSALS BY SHAREHOLDERS FOR THE 2002 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 2002 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
Thursday, November 29, 2001, for inclusion in the company's 2002 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 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 fourteen days or more
than fifty days prior to the meeting at which the proposal is to be acted upon
or the election is to be held. However, if less than twenty-one days' notice of
the meeting is given to shareholders, such proposal or nomination shall 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
Management of the company is not aware of any other matters to be brought
before the annual meeting. However, if any other matters are properly brought
before the annual meeting, 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 2000 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 written request of any record holder or beneficial owner of the shares
entitled to vote at the annual meeting, the company, without charge, will
provide a copy of the company's annual report for year ended December 31, 2000
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, MS 39350.
By Order of the Board of Directors,
March 29, 2001 /s/ Steve Webb, Chairman
18
APPENDIX A
CITIZENS HOLDING COMPANY AND
THE CITIZENS BANK OF PHILADELPHIA
AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the Board of Directors to be known as the audit
committee. The audit committee shall be composed of directors who are
independent of the management of the corporation and are free of any
relationships that, in the opinion of the board of directors, would interfere
with their exercise of independent judgment as a committee member.
Statement of Policy
The audit committee shall provide assistance to the corporate directors in
fulfilling their responsibility to the shareholders, potential shareholders, and
investment community relating to corporate accounting, reporting practices of
the corporation, and the quality and integrity of the financial reports of the
corporation. In so doing, it is the responsibility of the audit committee to
maintain free and open means of communication between the directors, the
independent auditors, the internal auditors, and the financial management of the
corporation.
Responsibilities
In carrying out its responsibilities, the audit committee believes its
policies and procedures should remain flexible, in order to best react to
changing conditions and to ensure to the directors and shareholders that the
corporate accounting and reporting practices of the corporation are in
accordance with all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the corporation and its
divisions and subsidiaries.
. Meet with the independent auditors and financial management of the
corporation to review the scope of the proposed audit for the current year
and the audit procedures to be utilized, and at the conclusion thereof
review such audit, including any comments or recommendations of the
independent auditors.
. Review with the independent auditors, the company's internal auditor, and
financial and accounting personnel, the adequacy and effectiveness of the
accounting and financial controls of the corporation, and elicit any
recommendations for the improvement of such internal control procedures or
particular areas where new or more detailed controls or procedures are
desirable. Particular emphasis should be given to the adequacy of such
internal controls to expose any payments, transactions, or procedures that
might be deemed illegal or otherwise improper. Further, the committee
periodically should review company policy statements to determine their
adherence to the code of conduct.
19
. Review the internal audit function of the corporation including the
independence and authority of its reporting obligations, the proposed audit
plans for the coming year, and the coordination of such plans with the
independent auditors.
. Receive prior to each meeting, a summary of findings from completed
internal audits and a progress report on the proposed internal audit plan,
with explanations for any deviations from the original plan.
. Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine that
the independent auditors are satisfied with the disclosure and content of
the financial statements to be presented to the shareholders. Any changes
in accounting principles should be reviewed.
. Provide sufficient opportunity for the internal and independent auditors to
meet with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the corporation's financial, accounting
and auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
. Review accounting and financial human resources and succession planning
within the company.
. Submit the minutes of all meetings of the audit committee to, or discuss
the matters discussed at each committee meeting with, the board of
directors.
. Investigate any matter brought to its attention within the scope of its
duties, with the power to retain outside counsel for this purpose if, in
its judgment, that is appropriate.
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 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 May 1, 2001, 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 27,
2001, 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 IV AND
"FOR" EACH OF THE NOMINEES FOR DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "AGAINST" PROPOSAL NO. V.
IMPORTANT- This Proxy must be signed and dated on the reverse side.
(CONTINUED ON REVERSE SIDE)
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
CITIZENS HOLDING COMPANY
May 1, 2001
[DETACH HERE]
PROPOSAL NO. I: To set the number of directors to serve on the Board of
Directors at twelve.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL NO. II AND III: Election of Directors
[_] FOR all nominees listed at right [_] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for all nominees listed at
right
INSTRUCTION: To withhold authority to vote for any individual nominees, check
the box to vote "FOR" all nominees and strike a line through the nominee's name
in the list at right.
PROPOSAL NO. II:
1. If Proposal No. I is approved, to elect four Class II Directors
Nominees: M.G. Bond
Karl Brantley
David A King
Greg L. McKee
2. If Proposal No. I is NOT approved, to elect three Class II Directors
Nominees: M.G. Bond
Karl Brantley
David A King
PROPOSAL NO. III: If Proposal No. I is approved, to elect one Class I
Director
Nominee: Donald L. Kilgore
PROPOSAL NO. IV: To ratify and approve the selection of Horne CPA Group as the
Company's independent auditors for the year 2001.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL NO. V: Shareholder Proposal
[_] 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 management "FOR" the nominees as directors, "FOR" Proposal
Nos. I and IV, and "AGAINST" Proposal No. V. The individuals designated on this
proxy card 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: ______________________________________________________, 2001
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).