SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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[ ] Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CITY NATIONAL BANCSHARES CORPORATION
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(Name of Registrant as Specified In Its Charter)
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CITY NATIONAL BANCSHARES CORPORATION
900 BROAD STREET
NEWARK, NEW JERSEY 07102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 23, 2002
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 23, 2002, 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; and
2. To ratify the appointment of KPMG LLP as the Corporation's independent
auditors for the fiscal year ending December 31, 2002.
Stockholders of record at the close of business on March 28, 2002 are
entitled to notice of and to vote at the meeting.
The Corporation's Proxy Statement and its 2001 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
March 28, 2002
CITY NATIONAL BANCSHARES CORPORATION
900 BROAD STREET
NEWARK, NEW JERSEY 07102
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 23, 2002
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 23, 2002, 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 2001 Annual Report to
Stockholders are being first mailed to our stockholders on or about April 25,
2002. 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 March 28, 2002 (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, 125,050 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.
The Corporation will reimburse brokerage firms and other custodians,
nominees and fiduciaries for their expense incurred in sending proxies and proxy
materials to beneficial owners of the Corporation's common stock.
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 28, 2002. This
information is based on Schedule 13D 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.
<Table>
<Caption>
NUMBER OF SHARES PERCENTAGE OF TOTAL
NAME BENEFICIALLY OWNED SHARES OUTSTANDING
- ---- ------------------ -------------------
Louis E. Prezeau............................................ 19,337(1) 15.44%
Lemar C. Whigham............................................ 9,392(2) 7.50%
Carolyn M. Whigham.......................................... 8,495 6.78%
Eugene Giscombe............................................. 8,950(3) 7.15%
United Negro College Fund, Inc.............................. 6,800 5.43%
</Table>
- ---------------
(1) Includes 1,416 shares held by his sons, 110 shares held by his daughter and
1,402 shares held by his wife.
(2) Includes 1,000 shares held by his wife.
(3) Includes 780 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 NOMINEES NAMED BELOW TO
SERVE FOR A THREE (3) YEAR TERM EXPIRING AT THE 2004 ANNUAL MEETING OF
STOCKHOLDERS.
Douglas Anderson, Eugene Giscombe and Louis Prezeau, each of whom is
currently serving as a director of the Corporation, are being nominated to serve
as a director with a term expiring at the 2005 Annual Meeting of Stockholders
and until his or her respective successor is duly elected and qualified.
Information is presented below as of March 28, 2002, 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.
2
<Table>
<Caption>
NUMBER OF
SHARES PERCENTAGE OF
DIRECTOR TERM BENEFICIALLY TOTAL SHARES
NAME OF DIRECTOR AGE SINCE ENDS BUSINESS EXPERIENCE OWNED OUTSTANDING
- ---------------- --- -------- ---- ------------------- ------------ -------------
Douglas E. Anderson......... 52 1989 2002 Managing Director, The Chase 265 *
Manhattan Bank
Barbara Bell Coleman........ 51 1995 2004 President, BBC Associates, 997 *
L.L.C. (consulting services)
Leon Ewing.................. 73 1973 2003 President, Ewing Bonding 2,680(1) 2.14%
Agency
Eugene Giscombe............. 61 1991 2002 President, Giscombe 8,950(2) 7.15%
Henderson, Inc. (property
management firm) President,
103 East 125th Street
Corporation (property
holding company)
Norman Jeffries............. 59 1989 2004 Comptroller, Montclair Child 214 *
Development Center
Louis E. Prezeau............ 59 1989 2002 President and Chief 19,337(3) 15.44%
Executive Officer, City
National Bank of New Jersey
and City National Bancshares
Corporation
Lemar C. Whigham............ 58 1989 2004 President, L & W Enterprises 9,392(4) 7.50%
(vending machine operations)
Directors and executive
officers as a group (10
persons).................. 45,422 36.28%
</Table>
- ---------------
(1) Includes 2,010 shares held by Mr. Ewing individually and 550 shares held
jointly with his wife.
(2) Includes 780 shares held by his wife.
(3) Includes 1,416 shares held by his sons, 110 shares held by his daughter and
1,402 shares held by his wife.
(4) Includes 1,000 shares held by his wife.
* Less than 1%
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During 2001, the Board of Directors held 12 regular monthly meetings. 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 serve on certain standing committees of the Bank's Board of
Directors. These committees, which are described below, serve similar functions
for the Corporation.
The AUDIT AND 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 2001. See additional Audit and Examining
Committee disclosure under "Additional Information Regarding Directors and
Officers".
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
3
Ms. Coleman currently serve as members of the Committee. Mr. Anderson serves as
Chairperson of the Committee. The Committee met 12 times during 2001.
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 2001.
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 once during 2001.
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 2001.
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 five meetings during 2001.
DIRECTOR COMPENSATION
Each director of the Corporation receives an annual retainer of $2,500 and
a $450 fee for each board meeting attended except for the chairperson, who
receives $600, and the secretary, who receives $550. Committee chairpersons
receive $200 for each meeting attended other than the chairperson of the Loan
and Discount Committee, who receives $300 per meeting. Other committee members
receive $200 for each meeting attended, except for Audit Committee members, who
receive $225 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.
<Table>
<Caption>
YEARS OF SERVICE (equal or greater) 5 (less than) 7 (equal or greater) 7 (less than) 8
- ---------------- ---------------------------------- ----------------------------------
APPLICABLE PERCENTAGE OF NORMAL RETIREMENT 20% 40%
BENEFIT......................................
<Caption>
YEARS OF SERVICE (equal or greater) 8 (less than) 9 (equal or greater) 9 (less than) 10
- ---------------- ---------------------------------- -----------------------------------
APPLICABLE PERCENTAGE OF NORMAL RETIREMENT 60% 80%
BENEFIT......................................
<Caption>
YEARS OF SERVICE (greater than) 10
- ---------------- -----------------
APPLICABLE PERCENTAGE OF NORMAL RETIREMENT 100%
BENEFIT......................................
</Table>
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.
4
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 BOARD RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE THREE (3)
NOMINEES FOR DIRECTOR.
THE EXECUTIVE OFFICERS
Listed below is certain information concerning the current executive
officers of the Corporation.
<Table>
<Caption>
IN OFFICE
NAME AGE SINCE OFFICE AND BUSINESS EXPERIENCE
- ---- --- --------- ------------------------------
Louis E. Prezeau............... 59 1989 President and Chief Executive Officer, City
National Bancshares Corporation and City National
Bank of New Jersey
Stanley Weeks.................. 45 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............... 56 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
Veronica T. Gilbert............ 42 1999 Senior Vice President, City National Bank of New
Jersey; 1987-1999 National Bank Examiner and Field
Officer Analyst, Office of the Comptroller of the
Currency
</Table>
5
SUMMARY COMPENSATION TABLE
The following table summarizes compensation for services to the Corporation
and the Bank for the years ended December 31, 2001, 2000 and 1999 paid to the
Chief Executive Officer and to the other named officers of the Corporation and
the Bank.
<Table>
<Caption>
LONG-TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS:
------------------------------------------- SECURITIES PAYOUTS:
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION
- ------------------ ---- -------- ------- --------------- ---------- ------------
Louis E. Prezeau.................... 2001 $185,000 $26,000 $6,768(2) $ -- $54,307(4)
President and Chief Executive 2000 169,556 20,000 9,476(2) -- 38,288(4)
Officer, City National Bancshares 1999 150,000 26,943 5,480(2) -- 37,527(4)
Corporation and City National Bank
of New Jersey
Stanley M. Weeks.................... 2001 $110,000 $23,300 $8,507(3) $ -- $ 7,689(5)
Senior Vice President and Chief 2000 104,500 8,135 6,166(3) -- 6,256(5)
Credit Officer, City National Bank 1999 97,500 2,194 7,231(3) -- 5,761(5)
of
New Jersey
Edward R. Wright.................... 2001 $ 99,000 $ 8,970 $9,347(3) $ -- $ --
Chief Financial Officer, City 2000 94,500 6,835 6,166(3) -- --
National
Bancshares Corporation and City 1999 91,000 2,047 8,030(3) -- --
National Bank of New Jersey
Veronica Gilbert.................... 2001 $ 97,500 $ 7,925 $6,827(3) $ -- $ --
Senior Vice President, City 2000 93,500 4,805 5,754(3) -- --
National
Bank of New Jersey
Raul Oseguera....................... 2001 $ 75,000 $25,750 $1,749(3) $ -- $ --
Vice President, City National Bank -- -- --
of New Jersey
</Table>
- ---------------
(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
$3,568, $6,276, and $2,280 in 2001, 2000 and 1999, respectively, and
insurance premiums paid on a life insurance policy on the life of Mr.
Prezeau of $3,200, 3,200 and $3,200, in 2001, 2000 and 1999, respectively.
(3) These amounts represent automobile allowance payments and payments made
under the Corporation's profit sharing plan.
(4) These amounts represent the accrual of benefits under the Director
Retirement Plan and Salary Continuation Plan.
(5) These amounts represent the accrual of benefits under the Salary
Continuation Plan.
PREZEAU EMPLOYMENT AGREEMENT
In May, 2000 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 $185,000,
subject to increases in the second and third year of the agreement at the
discretion of the Board. Additionally, Mr. Prezeau is to receive an annual
performance bonus equal to:
10% of the amount of earnings, as defined, 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;
6
20% of the amount of earnings, as defined, 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 may be granted an option to purchase an
undetermined amount of the Corporation's common stock at a price to be
determined at the time the option is granted. 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 employees 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, 2001, the Corporation had accrued director retirement
plan and accrued salary continuation benefits for Mr. Prezeau of $12,871 and
$167,365 respectively.
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.
7
ADDITIONAL INFORMATION REGARDING DIRECTORS AND OFFICERS
INFORMATION ABOUT THE CORPORATION'S AUDIT AND EXAMINING COMMITTEE
The members of the Audit and Examining Committee are considered to be
independent under the definition of independence contained in Rule 42005(a) of
the listing standards of the National Association of Securities Dealers. All the
members of the Audit Committee are considered financially literate, defined as
being able to read and understand fundamental financial statements. One member
is currently the chief financial officer of a business organization and is also
a certified public accountant. The Audit and Examining Committee currently does
not have a written charter. The Board of Directors has adopted an Audit
Committee Charter, which specifically defines the responsibilities and
obligations of the Audit and Examining Committee, and is included as Exhibit A.
REPORT OF THE AUDIT COMMITTEE
In connection with the December 31, 2001 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management; (2) discussed with the independent auditors the matters required by
Statement on Auditing Standards No. 61, Communications with Audit Committees, as
amended, by the Auditing Standards Board of the American Institute of Certified
Public Accountants and (3) received and discussed with the independent auditors
the matters required by Independence Standards Board Statement No. 1,
Independence Discussions with Audit Committee, as amended, by the Independence
Standards Board.
Based upon these reviews and discussions, the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Annual Report on Form 10-K filed with the Securities Exchange Committee.
Leon Ewing
Norman Jeffries
Lemar Whigham
TRANSACTIONS WITH MANAGEMENT
Certain directors of the Corporation had loans with the Bank in 2001. 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 2001.
8
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, 2001. 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 2002. 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.
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.
The Corporation incurred the following fees for services provided by KPMG,
LLP:
<Table>
Audit fees.................................................. $ 74,000
Financial information systems design........................ --
All other fees.............................................. 37,900
--------
$111,900
========
</Table>
The services referred to under the caption "All other fees" above related
to the preparation of the Corporation's income tax returns. The Audit and
Examining Committee considers the provision of these services as not
inconsistent with maintaining KPMG's independence with respect to the
Corporation.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" RATIFICATION OF THE SECTION OF
KPMG LLP AS INDEPENDENT AUDITORS FOR 2002.
STOCKHOLDER PROPOSALS
Stockholders who intend to present proposals at the 2003 Annual Meeting of
Stockholders must present a written proposal to the Corporation by December 22,
2002, 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
March 28, 2002
9
EXHIBIT A
CITY NATIONAL BANCSHARES CORPORATION
AUDIT COMMITTEE CHARTER
AUDIT COMMITTEE PURPOSE
The Audit Committee (the "Committee") is appointed by the Board of
Directors (the "Board") of City National Bancshares Corporation (the Company) to
assist the Board in fulfilling its oversight responsibilities. It is anticipated
that the Board of directors of the Company's subsidiary, City National Bank (the
"Bank") will appoint an audit committee of the board of the Bank (the Bank
Committee) composed of the same members as the Committee; provided that if the
membership of the Committee and the Bank Committee are the same, then the two
Committees shall perform their functions together and the actions and minutes of
either Committee shall serve as the actions and minutes of the other, unless
either Committee determines (and sets forth in its minutes) that it should act
separately; The Audit Committee's primary duties and responsibilities are to:
1. Monitor the integrity of the Company's financial reporting process and
systems of internal accounting controls regarding finance, accounting
and legal compliance;
2. Monitor the independence and performance of the Company's independent
accountants and internal auditing department; and
3. Provide an avenue of communication between the independent accountants,
management, the internal auditing department and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and also has direct access to
the independent accountants as well as anyone else in the Company. The Audit
Committee has the ability to retain, at the Company's expense, special legal,
accounting, or other consultants or experts it deems necessary in the
performance of its duties.
AUDIT COMMITTEE COMPOSITION AND MEETINGS
Audit Committee members shall meet the requirements of the Nasdaq and shall
be comprised of at least three directors as determined by the Board, each of
whom shall be independent nonexecutive directors, free from any relationship
that would interfere with the exercise of his or her independent judgment. All
members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial statements,
and at least one member of the Committee shall have accounting or related
financial management expertise.
Committee members shall be appointed by the Board. The Committee shall meet
at least four times annually, or more frequently as circumstances dictate. The
Committee chair shall prepare/and or approve an agenda in advance of each
meeting. The Committee should meet at least annually with management, the
director of the internal auditing department, the independent accountants and as
a committee to discuss any matters that the Committee or any of these groups
believe should be discussed. In addition, the Committee, or at least the chair,
should communicate with management and the independent accountants quarterly to
review the Company's financial statements and significant findings based upon
the independent accountants' limited review procedures.
AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
REVIEW PROCEDURES
1. Review and reassess the adequacy of the Charter annually. Submit the
Charter to the Board for approval and have the document published at least
every three years in accordance with S.E.C. regulations;
10
2. Review the Company's audited annual financial statements prior to filing or
distribution. The review should include discussion with management and
independent accountants of significant issues regarding accounting
principles, practices and judgments;
3. In consultation with management, the independent accountants and the
internal auditor, consider the integrity of the Company's financial
reporting process and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control and report
such exposures. Review significant findings prepared by the independent
accountants and the internal auditing department together with management's
responses;
4. Review with financial management and the independent accountants the
Company's quarterly financial results prior to the release of earnings
and/or the Company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's accounting
principles and any items required to be communicated to by the independent
accountants in accordance with Statement of Auditing Standards ("SAS") No.
61. The chair of the Committee may represent the entire Committee for
purposes of this review;
INDEPENDENT ACCOUNTANTS
5. The independent accountants are ultimately accountable to the Audit
Committee and the Board of Directors. The Committee shall review the
independence and performance of the independent accountants and annually
recommend to the Board of Directors the appointment of the independent
accountants or approve any discharge of accountants when circumstances
warrant;
6. Approve the fees and other significant compensation to be paid to the
independent accountants;
7. On an annual basis, the Committee should review and discuss with the
independent accountants all significant relationships they have with the
Company that could impair the accountants' independence;
8. Review the independent accountants' audit plan, including scope, staffing,
locations, reliance upon management and internal audit and general audit
approach;
9. Prior to releasing the year-end earnings, discuss the results of the audit
with the independent accountants. Discuss certain matters required to be
communicated to audit committees in accordance with SAS No. 61;
10. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in the
financial reporting;
INTERNAL AUDITING DEPARTMENT AND LEGAL COMPLIANCE
11. Review the budget, audit plan, changes in plan, activities, organizational
structure and qualifications of the internal auditing department, as
needed.
12. Review the appointment, performance and replacement of the senior audit
executive.
13. Review significant reports prepared by the internal auditing department
together with management's response and follow-up to these reports;
14. On an annual basis, review with the Company's counsel, any legal matters
that could have a significant impact on the Company's financial statements,
the Company's compliance with applicable laws and regulations and inquiries
received from regulators or governmental agencies;
OTHER AUDIT COMMITTEE RESPONSIBILITIES
15. Annually prepare a report to stockholders as required by the S.E.C. This
report should be included in the Company's annual proxy;
16. Perform any other activities consistent with this Charter, the Company's
by-laws and governing by-laws, as the Committee or the Board deems
necessary or appropriate;
11
17. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities;
OTHER OPTIONAL CHARTER DISCLOSURES
18. Establish, review and update periodically the Code of Conduct and ensure
that management has established a system to enforce this code;
19. Periodically perform a self-assessment of the Committee's performance;
20. Review financial and accounting personnel succession planning within the
Company; and
21. Annually review policies and procedures as well as audit results associated
with directors' and officers' expense accounts and perquisites. Annually
review a summary of directors' and officers' related party transactions and
potential conflicts of interest.
12
9406 Please mark
your votes as
indicated in X
this example
1. Election of Douglas E. Anderson, FOR WITHHOLD AUTHORITY
Eugene Giscombe and the nominees to vote for the nominee
Louis Prezeau | | | |
2. The ratification of the appointment FOR AGAINST ABSTAIN
of KPMG LLP as auditors for the fiscal | | | | | |
year ending December 31, 2002.
In their discretion, the proxies are
authorized to vote upon such other business
as may properly come before the meeting or
any postponement or adjournment thereof.
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS AND WILL
BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS APPEARING ON THIS
SIDE. IF A CHOICE IS NOT INDICATED
WITH RESPECT TO ITEMS 1 OR 2. THIS
PROXY WILL BE VOTED "FOR" SUCH
ITEM. THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY
OTHER MATTER PROPERLY BROUGHT
BEFORE THE MEETING OR ANY
POSTPONEMENT OR ADJOURNMENT
THEREOF. THIS PROXY IS REVOCABLE AT
ANY TIME BEFORE IT IS EXERCISED.
Receipt herewith of the
Company's Annual Report and notice
of meeting and proxy statement
dated March 28, 2002 is hereby
acknowledged.
PLEASE SIGN, DATE AND MAIL TODAY
Signature(s) of Stockholder(s) ______________________________ Date _________2002
Joint owners must EACH sign. Please sign EXACTLY as your name(s) appear(s) on
this card. When signing as attorney, executor, administrator, trustee, guardian,
partner, or corporate officer please give FULL title.
/\ FOLD AND DETACH HERE /\
CITY NATIONAL BANCSHARES CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 23, 2002
The undersigned hereby appoints Edward R. Wright and Stanley Weeks, and each of
them, as the undersigned's true and lawful agents and proxies with full power of
substitution in each, to represent the undersigned at the Annual Meeting of
Stockholders of CITY NATIONAL BANCSHARES CORPORATION to be held at the
Corporation's headquarters located at 900 Broad Street, Newark, New Jersey on
Thursday, May 23, 2002 at 6:00 p.m., and at any adjournments thereof, on all
matters coming before such meeting.
(Continued and to be signed on reverse side)
/\ FOLD AND DETACH HERE /\