SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Subsection 240.14a-11(c)
or Subsection 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
NORTH ARKANSAS BANCSHARES, INC.
- - ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
1. Title of each class of securities to which
transaction applies:
________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________
5. Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1. Amount previously paid:
____________________________________________
2. Form, Schedule or Registration Statement no.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
NORTH ARKANSAS BANCSHARES, INC.
200 OLIVIA DRIVE
NEWPORT, ARKANSAS 72112
November 20, 1998
Dear Fellow Stockholder:
You are cordially invited to attend the first Annual
Meeting of Stockholders of North Arkansas Bancshares, Inc. to be
held at Newport Federal Savings Bank, 200 Olivia Drive, Newport,
Arkansas on Monday, December 21, 1998 at 4:00 p.m., local time.
Your Board of Directors and Management look forward to
personally greeting those stockholders able to attend.
The attached Notice of Annual Meeting and Proxy Statement
describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the
Company. Directors and officers of the Company will be present
to respond to any questions the stockholders may have.
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND
THE ANNUAL MEETING. Your vote is important, regardless of the
number of shares you own. This will not prevent you from voting
in person but will assure that your vote is counted if you are
unable to attend the meeting. On behalf of your Board of
Directors, thank you for your interest and support.
Sincerely,
/s/ Brad Snider
Brad Snider
President
________________________________________________________________
NORTH ARKANSAS BANCSHARES, INC.
200 OLIVIA DRIVE
NEWPORT, ARKANSAS 72112
(870) 523-3611
________________________________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 21, 1998
________________________________________________________________
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders (the "Meeting") of North Arkansas Bancshares, Inc.
(the "Company"), will be held at Newport Federal Savings Bank,
200 Olivia Drive, Newport, Arkansas at 4:00 p.m. on Monday,
December 21, 1998.
A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. The election of one director of the Company;
and
2. The approval of the North Arkansas Bancshares,
Inc. 1998 Stock Option and Incentive Plan;
3. The approval of the North Arkansas Bancshares,
Inc. Management Recognition Plan; and
4. The transaction of such other matters as may
properly come before the Meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business
to come before the Meeting.
Any action may be taken on any one of the foregoing pro-
posals at the Meeting on the date specified above or on any date
or dates to which, by original or later adjournment, the Meeting
may be adjourned. Stockholders of record at the close of
business on November 10, 1998, are the stockholders entitled to
notice of and to vote at the Meeting and any adjournments
thereof.
You are requested to fill in and sign the enclosed form of
proxy which is solicited by the Board of Directors and to mail
it promptly in the enclosed envelope. The proxy will not be
used if you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Pamela Decker
PAMELA DECKER
SECRETARY
Newport, Arkansas
November 20, 1998
________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A
QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. PLEASE ACT PROMPTLY.
________________________________________________________________
________________________________________________________________
PROXY STATEMENT
OF
NORTH ARKANSAS BANCSHARES, INC.
200 OLIVIA DRIVE
NEWPORT, ARKANSAS 72112
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 21, 1998
________________________________________________________________
________________________________________________________________
GENERAL
________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of North
Arkansas Bancshares, Inc. (the "Company") to be used at the
Annual Meeting of Stockholders of the Company (the "Meeting")
which will be held at Newport Federal Savings Bank, 200 Olivia
Drive, Newport, Arkansas on Monday, December 21, 1998, at 4:00
p.m., local time. The accompanying notice of meeting and this
Proxy Statement are being first mailed to stockholders on or
about November 20, 1998.
________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
________________________________________________________________
Stockholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by such proxies will be voted at the Meeting and all
adjournments thereof. Proxies may be revoked by written notice
to the Secretary of the Company, at the address shown above, by
filing of a later dated proxy prior to a vote being taken on a
particular proposal at the Meeting or by attending the Meeting
and voting in person. Proxies solicited by the Board of
Directors of the Company will be voted in accordance with the
directions given therein. WHERE NO INSTRUCTIONS ARE INDICATED,
PROXIES WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR SET FORTH
BELOW AND IN FAVOR OF EACH OF THE OTHER PROPOSALS SET FORTH IN
THIS PROXY STATEMENT TO BE CONSIDERED AT THE MEETING. The proxy
confers discretionary authority on the persons named therein to
vote with respect to the election of any person as a director
where the nominee is unable to serve or for good cause will not
serve, and matters incident to the conduct of the Meeting.
Proxies marked as abstentions, and shares held in street name
which have been designated by brokers on proxies as not voted,
will not be counted as votes cast. Proxies marked as
abstentions or as broker non-votes will, however, be treated as
shares present for purposes of determining whether a quorum is
present.
________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________
The securities entitled to notice of and to vote at the
Meeting consist of the Company's common stock, par value $.01
per share (the "Common Stock"). Stockholders of record as of
the close of business on November 10, 1998 (the "Record Date"),
are entitled to one vote for each share of Common Stock then
held. As of the Record Date, there were 370,300 shares of
Common Stock issued and outstanding. The presence, in person or
by proxy, of at least one-third of the total number of shares of
Common Stock outstanding and entitled to vote will be necessary
to constitute a quorum at the Meeting.
Persons and groups owning in excess of 5% of the Common
Stock are required to file certain reports regarding such
ownership pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act") with the Company and the Securities
and Exchange Commission ("SEC"). Based on such reports (and
certain other written information received by the Company),
management knows of no persons other than those set forth below
who owned more than 5% of the outstanding shares of Common Stock
as of the Record Date. The following table sets forth, as of
the Record Date, certain information as to those persons who
were the beneficial owners of more than five percent (5%) of the
Company's outstanding shares of Common Stock and the shares of
Common Stock beneficially owned by all executive officers and
directors of the Company as a group.
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(1) OUTSTANDING(2)
- - -------------------- ------------ -------------
North Arkansas Bancshares, Inc. 29,624 (2) 8.00%
Employee Stock Ownership Plan
200 Olivia Drive
Newport, Arkansas 72112
Jeffrey L. Gendell 37,029 9.99%
Tontine Management, L.L.C.
Tontine Financial Partner, L.P.
Tontine Overseas Associates, L.L.C.
200 Park Avenue, Suite 3900
New York, New York 10166
All Executive Officers and Directors 38,373 (3) 10.36%
as a Group (5 persons)
<FN>
____________
(1) For purposes of this table, a person is deemed to be the beneficial owner
of any shares of Common Stock if he or she has or shares voting or
investment power with respect to such Common Stock or has a right to
acquire beneficial ownership at any time within 60 days from the Record
Date. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares. Except as otherwise noted, ownership is
direct, and the named persons exercise sole voting and investment power
over the shares of the Common Stock.
(2) These shares are held in a suspense account for future allocation among
participating employees as the loan used to purchase the shares is
repaid. The trustees of the North Arkansas Bancshares, Inc. Employee
Stock Ownership Plan (the "ESOP"), currently Directors Minor, Guinn and
Hodges, vote all allocated shares in accordance with instructions of the
participants. Unallocated shares and shares for which no instructions
have been received generally are voted by the ESOP trustees in the same
ratio as participants direct the voting of allocated shares or, in the
absence of such direction, as directed by the Company's Board of
Directors. As of the Record Date 2,962 shares had been allocated.
(3) Includes 882 shares which have been allocated to the accounts of
executive officers in the ESOP. Does not include 26,662 unallocated
shares held by the ESOP.
</FN>
________________________________________________________________
PROPOSAL I -- ELECTION OF DIRECTORS
________________________________________________________________
The Company's Board of Directors is composed of five
members. The Company's Charter requires that directors be
divided into three classes, as nearly equal in number as
possible, each class to serve for a three year period, with
approximately one-third of the directors elected each year. The
Board of Directors has nominated J. C. McMinn to serve as a
director for a three-year period. Mr. McMinn was appointed to
the Board of Directors in September, 1998 to fill the vacancy
created by the death of Paul K. Homes, Jr.
If any nominee is unable to serve, the shares represented
by all valid proxies will be voted for the election of such
substitute as the Board of Directors may recommend or the size
of the Board may be reduced to eliminate the vacancy. At this
time, the Board knows of no reason why any nominee might be
unavailable to serve.
Under the Company's Bylaws, directors shall be elected by
a plurality of the votes of the shares present in person or by
proxy at the Meeting. Votes which are not cast at the Meeting,
either because of abstentions or broker non-
2
votes, are not considered in determining the number of votes
which have been cast for or against the election of a nominee.
Unless otherwise specified on the proxy, it is intended
that the persons named in the proxies solicited by the Board
will vote for the election of the named nominees.
The following table sets forth the name of the Board's
nominee for election as director of the Company and of those
directors who will continue to serve as such after the Meeting.
Also set forth is certain other information with respect to each
person's age, the year he or she first became a director of the
Company's wholly owned subsidiary, Newport Federal Savings Bank
(the "Bank" or "Newport Federal"), the expiration of his or her
term as a director, and the number and percentage of shares of
the Common Stock beneficially owned. All of the individuals
were initially appointed as director of the Company in 1997 in
connection with the Company's incorporation, except Mr. McMinn
who was appointed in September 1998 to fill the vacancy caused
by the death of Paul K. Holmes.
SHARES OF
YEAR FIRST COMMON STOCK
ELECTED AS CURRENT BENEFICIALLY
AGE AT DIRECTOR OF TERM OWNED AT THE PERCENT
NAME RECORD DATE THE BANK TO EXPIRE RECORD DATE(1) OF CLASS(2)
- - -------------------------------------------------------------------------------------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2001
J.C. McMinn 63 1998 1998 300 0.08%
DIRECTORS CONTINUING IN OFFICE
O.E. Guinn, Jr. 69 1971 1999 9,204 2.49%
Kaneaster Hodges, Jr. 59 1979 1999 9,784 2.64%
John Minor 64 1971 2000 9,203 2.49%
Brad Snider 38 1991 2000 9,882 (2) 2.67%
<FN>
_______________
(1) Includes stock held in joint tenancy; stock owned as tenants in common;
stock owned or held by a spouse or other member of the individual's
household; stock allocated through certain employee benefit plans of the
Company; stock in which the individual either has or shares voting and/or
investment power and shares which the individual has the right to acquire
at any time within 60 days of the Record Date. Each person or relative
of such person whose shares are included herein exercises sole or shared
voting and dispositive power as to the shares reported. Does not include
shares with respect to which Directors Minor, Guinn and Hodges have
"voting power" by virtue of their positions as trustees of the trust
holding 29,624 shares under the Company's ESOP. The ESOP trustees must
vote all allocated shares held in the ESOP in accordance with the
instructions of the participants. Unallocated shares and allocated
shares for which no timely direction is received are voted by the ESOP
trustees in proportion to the participant-directed voting of allocated
shares.
(2) Includes 882 shares which have been allocated to the account of Mr.
Snider in the ESOP.
</FN>
3
The principal occupation of each director of the Company
for the last five years is set forth below.
J. C. MCMINN has served as Manager of Eldridge Supply
Company, a farm implement supply company based in Newport since
1987. He is a member of the Newport Kiwanis Club. He served on
the Newport Civil Service Commission, the City Beautiful
Commission, the American Legion Baseball Committee and the
Chamber of Commerce Agricultural Committee.
O.E. GUINN, JR. has been retired since 1994. Prior to his
retirement, he was self-employed as an insurance salesman
specializing in fire and casualty insurance. He is a member of
the Chamber of Commerce and the Newport Lions Club.
KANEASTER HODGES, JR. is an attorney in private practice
in Newport. He is also involved in farming and real estate
investments and operates a Newport-based energy conservation
firm, PSE, LLC. He is a member of the Newport Relief Society,
the Newport Levee District and the Walton Family Charitable
Support Foundation. He also serves on the White River Basin
Study Commission and the Arkansas State University-Beebe
Charitable Foundation, Inc.
JOHN MINOR is an insurance and real estate salesman in
Newport. He is Past President of the Arkansas Professional
Insurance Agents' League, Past President of the Lions Club, the
Newport Booster Club and the Jackson County Wildlife Federation.
He is a former member of the Newport School Board.
BRAD SNIDER has served as President and Chief Executive
Officer and Director since 1991. He has served as President of
the Newport Area Chamber of Commerce and serves on the boards of
the United Way of Jackson County, the Arkansas League of
Savings, the Newport Industrial Development Association and the
Arkansas State University/Newport Foundation. He is also a
Commissioner of the Newport Housing Authority of the City of
Newport and is a member of the Rotary Club.
________________________________________________________________
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
________________________________________________________________
The Board of Directors conducts its business through
meetings of the board and through activities of its committees.
During the year ended June 30, 1998, the board of directors held
12 regular meetings and three special meetings. No director
attended fewer than 75% of the total meetings of the board of
directors and committees on which such director served during
the year ended June 30, 1998.
The Company's Nominating Committee consists of the entire
Board of Directors. The Board met once in this capacity during
fiscal year 1998.
The full Board functions as an Audit Committee, in
conjunction with regularly scheduled Board meetings.
The Investment Committee consists of Directors Snider,
Hodges and Guinn. In addition to addressing investment issues
on regular Board meetings, the Committee meets as needed for
analysis and decision making.
4
________________________________________________________________
EXECUTIVE COMPENSATION
________________________________________________________________
SUMMARY COMPENSATION TABLE. The following table sets
forth the cash and non-cash compensation awarded to or earned by
the Chief Executive Officer of the Company and the Bank. No
other employee earned in excess of $100,000 for the year ended
June 30, 1998.
ANNUAL COMPENSATION
---------------------------------
OTHER ANNUAL ALL OTHER
NAME YEAR SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- - ---- ---- ------ ----- --------------- ---------------
Brad Snider 1998 $75,245 $ -- $10,500 $4,085
1997 71,662 -- 10,500 4,085
<FN>
___________
(1) Consists of director fees.
(2) Consists of premiums paid on behalf of Mr. Snider for split-dollar life
insurance ($2,465) and disability insurance ($1,620).
</FN>
PENSION PLAN TABLE. The following table indicates the
annual retirement benefit that would be payable under the plan
upon retirement at age 65 to a participant electing to receive
his retirement benefit in the standard form of benefit, assuming
various specified levels of plan compensation and various
specified years of credited service. Mr. Snider's credited
years of service under the plan are 6.5 years.
YEARS OF SERVICE
CAREER AVERAGE -----------------------------------------
COMPENSATION 15 20 25 30 35
- - ------------ ------ ------ ------ ------ ------
$ 20,000 $ 4,500 $ 6,000 $ 7,500 $ 9,000 $10,500
40,000 9,000 12,000 15,000 18,000 21,000
60,000 13,500 18,000 22,500 27,000 31,500
80,000 18,000 24,000 30,000 36,000 42,000
100,000 22,500 30,000 27,500 45,000 52,500
EMPLOYMENT AGREEMENT. The Bank has entered into an
employment agreement with President, Brad Snider. Mr. Snider's
base salary under the employment agreement is $75,245. The
employment agreement has a term of three years. The agreement
is terminable by the Bank for "just cause" as defined in the
agreement. If the Bank terminate Mr. Snider without just cause
or if Mr. Snider terminates his employment for "good reason",
Mr. Snider will be entitled to a continuation of his salary from
the date of termination through the remaining term of the
agreement, plus an additional 12 months. The employment
agreement also contains a provision stating that in the event of
the termination of employment in connection with any change in
control of the Company or the Bank, Mr. Snider will be paid a
lump sum amount equal to 2.99 times his five year average annual
taxable cash compensation. If such payments had been made under
the agreement as of June 30, 1998, such payments would have
equaled approximately $204,000. The aggregate payments that
would have been made to Mr. Snider would be an expense to the
Bank, thereby reducing the Bank's net income and the Bank's
capital by that amount. The agreement may be renewed annually
by the board of directors upon a determination of satisfactory
performance within the board's sole discretion. If Mr. Snider
shall become disabled during the term of the agreement, he shall
continue to receive payment of 100% of the base salary for a
period of up to 180 days. Such payments shall not be reduced by
any other benefit payments made under other disability program
in effect for employees. If Mr. Snider's employment terminates
for a reason other than just cause, he will be entitled to
purchase from the Bank family medical insurance through any
group health plan maintained by the Bank.
5
________________________________________________________________
DIRECTORS' COMPENSATION
________________________________________________________________
Each of the directors is paid an annual fee of $10,500.
Total aggregate fees paid to the directors for the year ended
June 30, 1998 were $52,500 (including $10,500 paid to Paul K.
Holmes, Jr. who was a director during the year ended June 30,
1998 but subsequently passed away).
DIRECTOR RETIREMENT PLAN. The Bank adopted the Newport
Federal Savings Bank Retirement Plan for Directors, effective
May 29, 1997. On the effective date, the Bank established a
bookkeeping account in the name of each non-employee director,
and credited each account with an amount equal to the product of
(i) $2,898, and (ii) the director's full years of service as a
director, up to 20 years. On each fiscal year end, each
participant who is then a director and has 20 or fewer years of
service shall have his account credited with an amount equal to
the product of $2,898 and the safe performance factor, which is
determined based on actual performance as compared to budgeted
goals for return on average equity, non-performing assets and
composite regulatory rating, provided that the safe performance
factor may not exceed 1.2. Also on the effective date, the
account of Brad Snider was credited for $60,000. On each June
30 during each of the years from 1998 until 2006, his account
will be credited with an additional amount equal to the product
of $19,600 and the safe performance factor. In the event Mr.
Snider should die or become disabled, his account will be
credited with an amount equal to the difference (if any) between
(i) 50% of the present value of all benefits which would have
been credited to his account if he had otherwise remained
employed by the Bank to age 65, and (ii) the benefits which are
actually credited to his account at the time of his death or
disability. If his employment terminates in connection with or
following a "change in control" of the Bank, his account will be
credited with an amount equal to the difference (if any) between
(i) 100% of the present value of all benefits which would have
been credited to his account if he had otherwise remained
employed by the Bank to age 65, and (ii) the benefits which are
actually credited to his account at the time of his termination,
subject to applicable "golden parachute" limitations under
federal income tax laws. At June 30, 1998, approximately
$49,000 would have been credited to Mr. Snider's account had a
change in control occurred at such date and his employment
agreement was also in effect. All amounts credited to
participants' accounts are fully vested at all times. Until
distributed in accordance with the terms of the plan, each
participant's account will be credited with a rate of return
equal to the Bank's highest rate of interest paid on
certificates of deposit having a term of one year. Following
the conversion, each participant may prospectively elect to have
the dividend-adjusted rate of return on the common stock measure
future appreciation.
Each participant may elect to receive plan benefits in a
lump sum cash payment or over a period shorter than ten years,
and in the absence of an election will receive payments in ten
substantially equal installments. In the event of a
participant's death, the balance of his plan account will be
paid in a lump sum (unless the participant elects a distribution
period up to ten years) to his designated beneficiary, or if
none, his estate.
Any compensation accrued under the plan will be paid from
the Bank's general assets. The Bank has established a trust in
order to hold assets with which to pay compensation. Trust
assets would be subject to claims of the Bank's general
creditors. In the event a participant prevails over the Bank in
a legal dispute as to the terms or interpretation of the plan,
he would be reimbursed for his legal and other expenses. Upon
the implementation of the plan, the Bank recognized compensation
expense totaling $286,000 to provide for participants' initial
account balances.
________________________________________________________________
TRANSACTIONS WITH MANAGEMENT
________________________________________________________________
The Bank offers loans to its directors, officers, and
employees. These loans currently are made in the ordinary
course of business with the same collateral, interest rates and
underwriting criteria as those of comparable transactions
prevailing at the time and to not involve more than the normal
risk of collectibility or present other unfavorable features.
Under current law, the Bank's loans to directors and executive
officers are required to be made on substantially the same
terms, including interest rates, as those prevailing for
comparable transactions and must not involve more than the
6
normal risk of repayment or present other unfavorable features.
Furthermore, loans above the greater of $25,000 or 5% of the
Bank's capital and surplus (i.e., up to $500,000) to such
persons must be approved in advance by a disinterested majority
of the Board of Directors. At June 30, 1998, the Bank's loans
to directors and executive officers totaled $939,697, or 17.64%
of the Company's stockholders equity at that date.
________________________________________________________________
PROPOSAL II -- APPROVAL OF 1998 STOCK OPTION AND INCENTIVE PLAN
________________________________________________________________
The Board of Directors of the Company is seeking
stockholder approval of the North Arkansas Bancshares, Inc. 1998
Stock Option and Incentive Plan (the "Option Plan"). The Option
Plan is attached hereto as Exhibit A and should be consulted for
additional information. All statements made herein regarding
the Option Plan, which are only intended to summarize the Option
Plan, are qualified in their entirety by reference to the Option
Plan.
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests
of the Company by providing directors and selected key employees
of the Company and its affiliates, including the Bank, with the
opportunity to acquire shares of Common Stock. By encouraging
such stock ownership, the Company seeks to attract, retain, and
motivate the best available personnel for positions of
substantial responsibility and to provide additional incentive
to directors and key employees of the Company and its affiliates
to promote the success of the business.
DESCRIPTION OF THE OPTION PLAN
EFFECTIVE DATE. The Option Plan will become effective on
December 21, 1998, (the "Effective Date"), although its
effectiveness is contingent on approval now by the Company's
stockholders. No awards may be made prior to approval of the
Plan by the stockholders of the Company. No awards may be made
prior to approval of the Plan by the stockholders of the
Company.
TIME OF GRANTING AWARDS. The date of grant of an Award
shall, for all purposes, be the later of the date on which the
Committee makes the determination of granting such Award, and
the Effective Date.
ADMINISTRATION. The Option Plan is administered by a
committee (the "Committee"), appointed by the Board of
Directors, consisting of at least two directors of the Company
who are "non-employee directors" within the meaning of the
federal securities laws. The Committee has discretionary
authority to select participants and grant awards, to determine
the form and content of any awards made under the Option Plan,
to interpret the Option Plan, to prescribe, amend and rescind
rules and regulations relating to the Option Plan, and to make
other decisions necessary or advisable in connection with
administering the Option Plan. All decisions, determinations,
and interpretations of the Committee are final and conclusive on
all persons affected thereby. Members of the Committee will be
indemnified to the full extent permissible under the Company's
governing instruments in connection with any claims or other
actions relating to any action taken under the Option Plan. It
is expected that the Committee will initially consist of
Directors Guinn, Hodges and Minor.
ELIGIBLE PERSONS. Under the Option Plan, the Committee
has discretionary authority to grant stock options ("Options")
and stock appreciation rights ("SARs") (collectively, "Awards")
to such employees and directors as the Committee shall
designate. In addition, the Option Plan specifies certain
automatic grants described below (see " -- Automatic Grants"
below). As of the Record Date, the Company and its affiliates
had 12 employees and four non-employee directors who were
eligible to participate in the Option Plan.
SHARES AVAILABLE FOR GRANTS. The Option Plan reserves
44,436 shares of Common Stock for issuance upon the exercise of
Options or SARs. Such shares may be authorized but unissued
shares or shares held in a grantor trust. In the event of any
merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up,
7
combination of shares, or similar event in which the number or
kind of shares is changed without receipt or payment of
consideration by the Company, the Committee will adjust both the
number and kind of shares under the Option Plan and the exercise
prices of such Options. If Awards should expire, become
unexercisable or be forfeited for any reason without having been
exercised, the shares of Common Stock subject to such Awards
shall, unless the Option Plan shall have been terminated, be
available for the grant of additional Awards under the Option
Plan.
OPTIONS; EXERCISE PRICE. Options may be either incentive
stock options ("ISOs") as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") or options that
are not ISOs ("Non-ISOs"). The exercise price as to any Option
may not be less than the fair market value (determined under the
Option Plan) of the optioned shares on the date of grant. In
the case of an optionee who owns more than 10% of the
outstanding Common Stock on the date of grant, such option price
may not be less than 110% of fair market value of the shares.
As required by federal tax laws, to the extent that the
aggregate fair market value (determined when an ISO is granted)
of the Common Stock with respect to which ISOs are exercisable
by an optionee for the first time during any calendar year
(under all incentive stock option plans of the Company and of
any affiliate) exceeds $100,000, the Options granted in excess
of $100,000 will be treated as Non-ISOs, and not as ISOs. The
exercise price of shares subject to any outstanding Option will
be proportionately adjusted upon the payment of a special large
and nonrecurring dividend that has the effect of a return of
capital to the stockholders, provided that the Committee did not
elect to pay the amount of such nonrecurring dividend to the
optionee upon exercise of the Option.
AUTOMATIC GRANTS. On the Effective Date, certain
employees and directors of the Company and the Bank received
one-time grants of Options to purchase shares of Common Stock at
an exercise price per share equal to its fair market value on
that date (see "-- Proposed Stock Option Grants" and "New Plan
Benefits" below).
SARS. An SAR may be granted in tandem with all or part of
any Option granted under the Option Plan, or without any
relationship to any Option. An SAR granted in tandem with an
ISO must expire no later than the ISO, must have the same
exercise price as the ISO and may be exercised only when the ISO
is exercisable and when the fair market value of the shares
subject to the ISO exceeds the exercise price of the ISO. For
SARs granted in tandem with Options, the optionee's exercise of
the SAR cancels his or her right to exercise the Option, and
vice versa. Regardless of whether an SAR is granted in tandem
with an Option, exercise of the SAR will entitle the optionee to
receive, as the Committee prescribes in the grant, all or a
percentage of the difference between (i) the fair market value
of the shares of Common Stock subject to the SAR at the time of
its exercise, and (ii) the fair market value of such shares at
the time the SAR was granted (or, in the case of SARs granted in
tandem with Options, the exercise price). The exercise price as
to any particular SAR may not be less than the fair market value
of the optioned shares on the date of grant.
EXERCISE OF OPTIONS AND SARS. The exercise of Options and
SARs will be subject to such terms and conditions as are
established by the Committee in a written agreement between the
Committee and the optionee. The Committee shall specify any
vesting requirement in the agreement granting an Option. Each
Option granted upon the effectiveness of the Plan shall be 100%
vested upon grant. Notwithstanding the imposition of a vesting
requirement in connection with any Option, each Option shall be
exercisable immediately upon termination of the participant's
continuous service due to the participant's disability or death,
as well as immediately upon a change in control (as defined in
the Company's Management Recognition Plan as in effect on the
Effective Date) or execution of a written agreement to effect a
change in control of the Bank or the Company. In the absence of
Committee action to the contrary, an otherwise unexpired Option
shall cease to be exercisable upon (i) an optionee's termination
of employment for "just cause" (as defined in the Option Plan),
(ii) the date that is one year after an optionee terminates
service for a reason other than just cause or death (iii) the
date that is two years after an optionee's death.
An optionee may exercise Options or SARs, subject to
provisions relative to their termination and limitations on
their exercise, only by (i) written notice of intent to exercise
the Option or SAR with respect to a specified number of shares
of Common Stock, and (ii) in the case of Options, payment to the
Company (contemporaneously with delivery of such notice) in
cash, in Common Stock, or a combination of cash and Common
Stock, of the amount of the exercise price for the number of
shares with respect to which the Option is then being exercised.
Common Stock utilized in full
8
or partial payment of the exercise price for Options shall be
valued at its market value at the date of exercise, and may
consist of shares subject to the Option being exercised.
CONDITIONS ON ISSUANCE OF SHARES. The Committee will have
the discretionary authority to impose, in agreements, such
restrictions on shares of Common Stock issued pursuant to the
Option Plan as it may deem appropriate or desirable, including
but not limited to the authority to impose a right of first
refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee may not issue shares
unless the issuance complies with applicable securities laws,
and to that end, may require that a participant make certain
representations or warranties. The inability of the Company to
obtain approval from any regulatory body or authority deemed by
the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such
Shares.
TRANSFERABILITY. Holders of Awards may transfer their
Awards to family members or trusts under specified
circumstances. Awards may not otherwise be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent and distribution.
In addition, Common Stock that is purchased upon the exercise of
an Option or SAR may not be sold within the six-month period
following the grant date of that Option or SAR, except in the
event of the participant's death or disability.
EFFECT OF DISSOLUTION AND RELATED TRANSACTIONS. In the
event of (i) the liquidation or dissolution of the Company, (ii)
a merger or consolidation in which the Company is not the
surviving entity, or (iii) the sale or disposition of all or
substantially all of the Company's assets (any of the foregoing
to be referred to herein as a "Transaction"), all outstanding
Awards, together with the exercise prices thereof, will be
equitably adjusted for any change or exchange of shares for a
different number or kind of shares or other securities which
results from the Transaction. However, any such adjustment will
be made in such a manner as to not constitute a modification,
within the meaning of Section 424(h) of the Code, of outstanding
ISOs.
DURATION OF THE OPTION PLAN AND GRANTS. The Option Plan
has a term of 10 years from the Effective Date, after which date
no Awards may be granted. The maximum term for an Award is 10
years from the date of grant, except that the maximum term of an
ISO (and an SAR granted in tandem with an ISO) may not exceed
five years if the optionee owns more than 10% of the Common
Stock on the date of grant. The expiration of the Option Plan,
or its termination by the Committee, will not affect any Award
then outstanding.
AMENDMENT, MODIFICATION, AND TERMINATION OF THE OPTION
PLAN. The Board of Directors of the Company may from time to
time amend the terms of the Option Plan and, with respect to any
shares at the time not subject to Awards, suspend or terminate
the Option Plan. No amendment, suspension, or termination of
the Option Plan will, without the consent of any affected holder
of an Award, alter or impair any rights or obligations under any
Award previously granted.
FINANCIAL EFFECTS OF AWARDS. The Company will receive no
monetary consideration for the granting of Awards under the
Option Plan. It will receive no monetary consideration other
than the exercise price for shares of Common Stock issued to
optionees upon the exercise of their Options, and will receive
no monetary consideration upon the exercise of SARs. Under
applicable accounting standards, recognition of compensation
expense is not required when Options are granted at an exercise
price equal to or exceeding the fair market value of the Common
Stock on the date the Option is granted.
The granting of SARs will require charges to the income of
the Company based on the amount of the appreciation, if any, in
the average market price of the Common Stock to which the SARs
relate over the exercise price of those shares. If the average
market price of the Common Stock declines subsequent to a charge
against earnings due to estimated appreciation in the Common
Stock subject to SARs, the amount of the decline will reverse
such prior charges against earnings (but not by more than the
aggregate of such prior charges).
9
FEDERAL INCOME TAX CONSEQUENCES
ISOS. An optionee recognizes no taxable income upon the
grant of ISOs. If the optionee holds the shares purchased upon
exercise of an ISO for at least two years from the date the ISO
is granted, and for at least one year from the date the ISO is
exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain.
However, the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price of
the ISO will be treated by the optionee as an item of tax
preference in the year of exercise for purposes of the
alternative minimum tax. If an optionee disposes of the shares
before the expiration of either of the two special holding
periods noted above, the disposition is a "disqualifying
disposition." In this event, the optionee will be required, at
the time of the disposition of the Common Stock, to treat the
lesser of the gain realized or the difference between the
exercise price and the fair market value of the Common Stock at
the date of exercise as ordinary income and the excess, if any,
as capital gain.
The Company will not be entitled to any deduction for
federal income tax purposes as the result of the grant or
exercise of an ISO, regardless of whether or not the exercise of
the ISO results in liability to the optionee for alternative
minimum tax. However, if an optionee has ordinary income
taxable as compensation as a result of a disqualifying
disposition, the Company will be entitled to deduct an
equivalent amount.
NON-ISOS. In the case of a Non-ISO, an optionee will
recognize ordinary income upon the exercise of the Non-ISO in an
amount equal to the difference between the fair market value of
the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the
federal securities laws, upon the lapse of those restrictions
unless the optionee makes a special tax election within 30 days
after the date of exercise to have the general rule apply).
Upon a subsequent disposition of such shares, any amount
received by the optionee in excess of the fair market value of
the shares as of the exercise date will be taxed as capital
gain. The Company will be entitled to a deduction for federal
income tax purposes at the same time and in the same amount as
the ordinary income recognized by the optionee in connection
with the exercise of a Non-ISO.
SARS. The grant of an SAR has no tax effect on the
optionee or the Company. Upon exercise of the SARs, however,
any cash or Common Stock received by the optionee in connection
with the surrender of his or her SAR will be treated as
compensation income to the optionee, and the Company will be
entitled to a business expense deduction for the amounts treated
as compensation income.
PROPOSED STOCK OPTION GRANTS
Set forth below is certain information relating to all
Options which are to be granted to the specified individuals and
groups of individuals on the Effective Date of the Option Plan.
All such Options (i) will be subject to the terms and conditions
described above, and are contingent on, and not exercisable
until, the Option Plan receives stockholder approval, and (ii)
will automatically expire ten years after the date of their
grant. The exercise price for these Options will equal the per
share fair market value of the Common Stock on the date of
grant.
NUMBER OF SHARES
PARTICIPANT OR GROUP SUBJECT TO OPTIONS
- - -------------------- ------------------
Brad Snider 11,109
All executive officers as a group
(1 person) 11,109
All directors who are not executive
officers as a group 9,333
For additional information relating to proposed option
grants, see "New Plan Benefits" below.
10
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan
is desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of
Directors is seeking stockholder approval of the Option Plan in
order to assure their support for the Option Plan, as well as to
satisfy the requirements of the Code for favorable tax treatment
of ISOs.
Stockholder approval of the Option Plan requires the
affirmative vote of the holders of a majority of the votes cast
at the Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" APPROVAL OF THE OPTION PLAN.
________________________________________________________________
PROPOSAL III -- APPROVAL OF MANAGEMENT RECOGNITION PLAN
________________________________________________________________
GENERAL
The Board of Directors of the Company is seeking approval
of the North Arkansas Bancshares, Inc. Management Recognition
Plan (the "MRP"). A copy of the MRP is attached hereto as
Exhibit B, and should be consulted for additional information.
All statements made herein regarding the MRP, which are only
intended to summarize the MRP, are qualified in their entirety
by reference to the MRP.
PURPOSE OF THE MRP
The purpose of the MRP is to reward and retain personnel
of experience and ability in key positions of responsibility by
providing employees and directors of the Company, the Bank and
their affiliates with a proprietary interest in the Company, and
as compensation for their past contributions to the Bank, and
with an incentive to make such contributions in the future.
DESCRIPTION OF THE MRP
EFFECTIVE DATE. The MRP became effective on December 21,
1998 (the "Effective Date"), although its effectiveness is
contingent upon approval now by the Company's stockholders.
ADMINISTRATION. The MRP will be administered by an MRP
Committee consisting of not less than two non-employee members
of the Board who are "non-employee directors" within the meaning
of the federal securities laws. Except as limited by the
express provisions of the MRP or by resolutions adopted by the
Board, the MRP Committee has sole and complete authority and
discretion (1) to grant MRP awards to such employees as the MRP
Committee may select, (2) to determine the form and content of
MRP awards to be issued under the MRP, (3) to interpret the MRP,
(4) to prescribe, amend, and rescind rules and regulations
relating to the MRP, and (5) to make other determinations
necessary or advisable for the administration of the MRP. The
MRP provides that members of the MRP Committee shall be
indemnified and held harmless for actions taken under the MRP in
good faith and which he or she reasonably believed to be in the
best interests of the Company and its affiliates. As of the
Record Date, the MRP Committee consisted of Directors Guinn,
Hodges and Minor.
MRP TRUST; PURCHASE LIMITATIONS. The assets of the MRP
will be held in a trust (the "MRP Trust"), as to which Directors
act as trustees ("MRP Trustees") and thereby have the
responsibility to invest all funds contributed to the MRP Trust
by the Company or the Bank. With funds contributed by the
Company, the MRP Trust may purchase, in the aggregate, up to
7,406 shares of Common Stock. The number of shares is the
maximum that the MRP Trust may purchase. Such shares may be
authorized but unissued shares, (ii) shares held in a grantor
trust. In the event an MRP award is forfeited for any reason or
additional shares are purchased by the MRP Trust associated with
the MRP, the MRP Committee may make awards with respect to such
shares.
11
TYPES OF AWARDS; ELIGIBLE PERSONS. The MRP Committee may
make awards, in the form of restricted stock, with respect to
shares held in the MRP Trust. The MRP Committee has the
discretion to select employees of the Company and/or of the Bank
who will receive discretionary MRP awards. In selecting those
employees to whom MRP awards will be granted and the number of
shares covered by such awards, the MRP Committee will consider
the position, duties and responsibilities of the eligible
employees, the value of their services to the Company and its
affiliates (including the Bank), and any other factors the MRP
Committee may deem relevant. In addition, the MRP specifically
provides for certain automatic awards on the Effective Date to
Brad Snider, O.E. Guinn, Jr., Kaneaster Hodges, Jr. and John
Minor of 1,852, 518, 518 and 518 shares, respectively. (See
"New Plan Benefits" below.)
VESTING. Pursuant to the MRP, freely transferable shares
of Common Stock will be transferred to participants as they
become vested in their MRP awards. Unless the Committee
specifically eliminates any vesting requirement or imposes a
different vesting schedule, MRP awards will become 33 1/3%
vested upon the date of the award and 33 1/3% vested upon
completion of each of two years of service after the date of the
award. All shares of Common Stock subject to outstanding awards
will be immediately 100% earned and nonforfeitable upon a
participant's retirement at or after age 65, death or disability
(as defined in the MRP) or upon a change in control (as defined
in the MRP) or execution of a written agreement to effect a
change in control of the Bank or the Company. If a participant
terminates employment for reasons other than death, disability,
or a change in corporate control, the participant forfeits all
rights to the shares then under restriction.
DISTRIBUTIONS OF SHARES; VOTING. As MRP awards vest, the
MRP Trustees will distribute shares of Common Stock from the MRP
trust. One share of Common Stock will be given for each share
earned, with stock dividends also included. Payments
representing cash dividends (and earnings thereon) will be made
in cash. The MRP Trustees vote all shares of Common Stock held
by the MRP Trust (whether or not subject to an MRP award) in the
same proportion as the trustee of the Company's Employee Stock
Ownership Plan trust votes Common Stock held therein. In the
absence of any such voting, those shares will be voted in the
manner directed by the Board of Directors. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan
Share prior to the time said Plan Shares are actually
distributed to him.
DEFERRAL ELECTIONS. At any time prior to December 31st of
any year prior to the date on which a Participant becomes vested
in any shares subject to his or her Plan Share Award, a
Participant who is a member of a select group of management or
highly compensated employees (within the meaning of the
Employees' Retirement Income Security Act of 1973) may
irrevocably elect, to defer the receipt of all or a percentage
of the Plan Shares that would otherwise be transferred to the
Participant upon the vesting of such award (the "Deferred
Shares"). Notwithstanding any other provision of the Plan or a
Participant's Election Plan, in the event the Participant
suffers an unforeseeable emergency hardship (See Paragraph
7.05(d) of the "Plan"), the Participant may apply to the
"Committee" for an immediate distribution of all or a portion of
his "Deferred Shares" and "Deferred Earnings."
DIVIDENDS. Whenever shares of Common Stock are paid to an
award recipient or beneficiary thereof, such recipient or
beneficiary shall also be entitled to receive, with respect to
each share paid, an amount equal to any cash dividends
(including special large and nonrecurring dividends, including
one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to
any stock dividends declared and paid with respect to a share of
Common Stock between the date the relevant MRP award was
initially granted to such participant and the date the shares
are being distributed. There shall also be distributed an
appropriate amount of net earnings, if any, of the MRP Trust
with respect to any cash dividends so paid out.
No Plan Shares may be distributed from the MRP Trust prior
to the date which is five years from the date of the Bank's
conversion from mutual to stock form to the extent the recipient
would after receipt of such shares own in excess of 10% of the
issued and outstanding shares of Common Stock, unless such
action is approved in advance by a majority vote of non-employee
directors of the Company's Board of Directors. Any shares
remaining undistributed solely by reason of the operation of
this rule shall be distributed to the recipient on the date
which is five years from the date of the Bank's conversion from
mutual to stock form.
12
TRANSFERABILITY. MRP awards are transferable only (i) by
participants to family members or trusts under specified
circumstances and (ii) by will or the laws of dissent and
distribution. MRP awards and rights to shares held in the MRP
Trust are not otherwise transferable by participants in the MRP,
and during the lifetime of a participant, shares held in the MRP
Trust may only be earned by and paid to the participant.
TAXATION. Participants will recognize ordinary income
when their interest vests, or at an earlier date pursuant to a
participant's election to accelerate recognition pursuant to
Section 83(b) of the Internal Revenue Code. Whenever
participants recognize ordinary income, the Company may deduct
a compensation expense for the same amount.
FINANCIAL EFFECTS OF AWARDS. Neither the Company nor the
Bank will receive any monetary consideration for the granting of
awards under the MRP. Under current accounting standards, when
MRP awards are granted, the Company must recognize compensation
expense based on the fair market value of the Common Stock on
the date the MRP awards are granted, with such amount being
amortized over the expected vesting period for the award.
ADJUSTMENTS FOR CAPITAL CHANGES. In the event of any
merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares
is changed without receipt or payment of consideration by the
Company, the MRP Committee will adjust both the number and kind
of shares of stock which may be purchased under the MRP, and the
number and kind of shares of stock subject to outstanding MRP
awards. If, by reason of any adjustment made pursuant to this
Section, a Participant becomes entitled to new, additional, or
different shares of stock or securities, such shares shall
thereupon be subject to all of the conditions and restrictions
which were applicable to the shares pursuant to the Plan Share
Award before the adjustment was made. In the event of (i) the
liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity,
or (iii) the sale or disposition of all or substantially all of
the Company's assets, all outstanding MRP awards shall be
adjusted for any change or exchange of shares of Common Stock
for a different number or kind of shares or other securities
which results from the transaction. In addition, the Committee
shall have the discretionary authority to impose on the Shares
subject to Plan Share Awards to Employees such restrictions as
the Committee may deem appropriate or desirable, including but
not limited to a right of first refusal, or repurchase option,
or both of these restrictions.
AMENDMENT AND TERMINATION OF THE MRP. The Company's Board
of Directors may, by resolution, at any time amend or terminate
the MRP, provided that no amendment or termination of the MRP
will, without the written consent of any affected holders of an
MRP award, impair any rights or obligations under any MRP award
previously granted. The power to amend or terminate includes
the power to direct the MRP Trustees to return to the Company
all or any part of the assets of the MRP Trust, including shares
of Common Stock held in the plan share reserve of the MRP.
However, the termination of the MRP Trust may not affect a
participant's right to earn outstanding MRP awards and to
receive Common Stock relating thereto, including earnings
thereon, in accordance with the terms of the MRP and the
particular MRP award made to the participant.
DURATION OF THE MRP. The MRP and MRP Trust will remain in
effect until the earlier of (i) termination by the Company's
Board of Directors, or (ii) the distribution of all assets of
the MRP Trust. Termination of the MRP will not affect any
awards previously granted, and such MRP awards will remain valid
and in effect until they have been earned and distributed from
the MRP Trust, or by their terms expire or are forfeited.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the MRP is
desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of
Directors is seeking stockholder approval of the MRP in order to
assure their support for the MRP.
Approval of the MRP requires the affirmative vote of the
holders of a majority of the votes cast at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
MRP.
13
________________________________________________________________
NEW PLAN BENEFITS
________________________________________________________________
The following table sets forth certain information
regarding the benefits to be received under the Option Plan and
the MRP.
Option Plan MRP (1)
-----------------------------------------------
Dollar Number Dollar Number
Name and Position Value ($)(2) of Units Value ($)(3) of Units
- - ----------------- -------------------------------------------------
Brad Snider, President
and Chief Executive Officer -- 11,109 $ 18,520 1,852
All current executive officers
as a group -- 11,109 $ 18,520 1,852
All current directors who are
not executive officers as
a group -- 9,333 $ 15,540 1,554
<FN>
_______________
(1) None of the shares of Common Stock awarded pursuant to the MRP currently
is vested. For information regarding the vesting of shares awarded
pursuant to the MRP, see "Proposal IV -- Approval of Management
Recognition Plan."
(2) All Options will be granted at an exercise price equal to the fair market
value of the underlying shares of Common Stock on the date of the grant.
(3) Based on the Common Stock's fair market value of $10.00 per share.
</FN>
________________________________________________________________
RELATIONSHIP WITH INDEPENDENT AUDITORS
________________________________________________________________
KPMG Peat Marwick LLP was the Company's independent
certified public accountants for the 1998 fiscal year. The
Board of Directors presently intends to renew the Company's
arrangement with KPMG Peat Marwick LLP to be its independent
certified public accountant for the fiscal year ending June 30,
1999. A representative of KPMG Peat Marwick LLP is not expected
to be present at the Meeting to respond to appropriate
questions.
________________________________________________________________
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
________________________________________________________________
Pursuant to regulations promulgated under the Exchange
Act, the Company's officers, directors and persons who own more
than ten percent of the outstanding Common Stock are required to
file reports detailing their ownership and changes of ownership
in such Common Stock, and to furnish the Company with copies of
all such reports. Based on the Company's review of such reports
which the Company received during the last fiscal year, or
written representations from such persons that no annual report
of change in beneficial ownership was required, the Company
believes that, during the last fiscal year, all persons subject
to such reporting requirements have complied with the reporting
requirements.
________________________________________________________________
OTHER MATTERS
________________________________________________________________
The Board of Directors is not aware of any business to
come before the Meeting other than those matters described above
in this Proxy Statement. However, if any other matters should
properly come before the Meeting, it
14
is intended that proxies in the accompanying form will be voted
in respect thereof in accordance with the determination of the
Board of Directors.
________________________________________________________________
MISCELLANEOUS
________________________________________________________________
The cost of soliciting proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of Common Stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may
solicit proxies personally or by telegraph or telephone without
additional compensation.
The Company's Annual Report to Stockholders, including
financial statements, is being mailed to all stockholders of
record as of the Record Date. Any stockholder who has not
received a copy of such Annual Report may obtain a copy by
writing to the Secretary of the Company. Such Annual Report is
not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
________________________________________________________________
STOCKHOLDER PROPOSALS
________________________________________________________________
It is expected that the Company's 1999 Annual Meeting of
Stockholders will be held in November 1998. In order to be
eligible to be considered for inclusion in the Company's proxy
materials for such Annual Meeting, any stockholder proposal to
take action at such meeting must be received at the Company's
executive office at 200 Olivia Drive, Newport, Arkansas 72112,
no later than June 10, 1999. Any such proposal shall be subject
to the requirements of the proxy rules adopted under the
Exchange Act.
Stockholder proposals to be considered at such Annual
Meeting, other than those submitted pursuant to the Exchange
Act, must be stated in writing, delivered or mailed to the
Secretary of the Company, not less than thirty days nor more
than sixty days prior to the date of the Annual Meeting. If
less than forty days' notice of the meeting is given to
stockholders, such notice shall be delivered or mailed to the
Secretary not later than the close of business on the tenth day
following the day on which notice of the meeting was mailed to
stockholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Pamela Decker
PAMELA DECKER
SECRETARY
Newport, Arkansas
November 20, 1998
________________________________________________________________
FORM 10-KSB
________________________________________________________________
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR
ENDED JUNE 30, 1998 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO STOCKHOLDERS AS
OF THE RECORD DATE UPON WRITTEN REQUEST TO THE SECRETARY, NORTH
ARKANSAS BANCSHARES, INC., 200 OLIVIA DRIVE, NEWPORT, ARKANSAS
72112.
________________________________________________________________
15
EXHIBIT A
NORTH ARKANSAS BANCSHARES, INC.
1998 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of
the Company through providing select key Employees and Directors
of the Bank, the Company, and their Affiliates with the
opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the
best available personnel for positions of substantial respon-
sibility and to provide additional incentives to Directors and
key Employees of the Company or any Affiliate to promote the
success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(d) "Bank" shall mean Newport Federal Savings Bank.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Change in Control" means any one of the following
events: (1) the acquisition of ownership, holding or power to
vote more than 25% of the Bank's or the Company's voting stock,
(2) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (4) the acquisition of control
of the Bank or the Company within the meaning of 12 C.F.R. Part
574 or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof, ownership or control of the Bank by the
Company itself shall not constitute a "Change in Control"), or
(5) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Company or the Bank
(the "Existing Board") cease for any reason to constitute at
least two-thirds thereof, provided that any individual whose
election or nomination for election as a member of the Existing
Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a
Continuing Director. For purposes of this subparagraph only,
the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other
form of entity not specifically listed herein. The decision of
the Committee as to whether a change in control has occurred
shall be conclusive and binding.
(g) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(h) "Committee" shall mean either the Stock Option
Committee appointed by the Board in accordance with Paragraph
5(a) hereof, or the Board, which may act independently as the
Committee.
A-1
(i) "Common Stock" shall mean the common stock of the
Company.
(j) "Company" shall mean North Arkansas Bancshares, Inc.
(k) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
(l) "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate that the
Board has by resolution designated as being eligible for
participation in this Plan.
(m) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
(n) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
(o) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(q) "ISO" shall mean an option to purchase Common Stock
which meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(r) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(s) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(t) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an
Award granted pursuant to this Plan.
(w) "Participant" shall mean any person who receives an
Award pursuant to the Plan.
(x) "Plan" shall mean this North Arkansas Bancshares,
Inc. 1998 Stock Option and Incentive Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right
to receive the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of Common
Stock.
A-2
(bb) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) TERM OF THE PLAN. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 16 hereof. No Award shall be
granted under the Plan after ten years from the Effective Date.
(b) TERM OF AWARDS. The term of each Award granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) GENERAL RULE. Except as otherwise required under
Paragraph 11, the aggregate number of Shares deliverable
pursuant to Awards shall not exceed 44,436 Shares. Such Shares
may either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust. If any Awards
should expire, become unexercisable, or be forfeited for any
reason without having been exercised, the Optioned Shares shall,
unless the Plan shall have been terminated, be available for the
grant of additional Awards under the Plan.
(b) SPECIAL RULE FOR SARS. The number of Shares
with respect to which an SAR is granted, but not the number of
Shares which the Company delivers or could deliver to an
Employee or individual upon exercise of an SAR, shall be charged
against the aggregate number of Shares remaining available under
the Plan; provided, however, that in the case of an SAR granted
in conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and
vice versa, only the number of Shares subject to the Option
shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an
Option as to which option rights have terminated by reason of
the exercise of a related SAR, as provided in Paragraph 10
hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF THE COMMITTEE. The Plan shall be
administered by the Committee, which shall consist of not less
than two (2) members of the Board who are Non-Employee
Directors. Members of the Committee shall serve at the pleasure
of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by the Board.
(b) POWERS OF THE COMMITTEE. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion (i) to select Participants and grant Awards, (ii) to
determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan,
(iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in
writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) AGREEMENT. Each Award shall be evidenced by a
written agreement containing such provisions as may be approved
by the Committee. Each such Agreement shall constitute a
binding contract between the Company and the Participant, and
every Participant, upon acceptance of such Agreement, shall be
bound by the terms and
A-3
restrictions of the Plan and of such Agreement. The terms of
each such Agreement shall be in accordance with the Plan, but
each Agreement may include such additional provisions and
restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are
not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise
Price of an Option or SAR, (ii) the number of Shares subject to
the Award, and its expiration date, (iii) the manner, time, and
rate (cumulative or otherwise) of exercise or vesting of such
Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors
and officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Awards.
(d) EFFECT OF THE COMMITTEE'S DECISIONS. All decisions,
determinations and interpretations of the Committee shall
be final and conclusive on all persons affected thereby.
(e) INDEMNIFICATION. In addition to such other rights
of indemnification as they may have, the members of the
Committee shall be indemnified by the Company in connection with
any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or
any Award, granted hereunder to the full extent provided for
under the Company's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) GENERAL RULE. Employees and Directors shall be
eligible to receive Awards. In selecting those Employees and
Directors to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible
individuals, the value of their services to the Company and its
Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall
automatically make the Awards specified in Paragraph 6(b)
hereof.
(b) AUTOMATIC GRANTS TO DIRECTORS. On the Effective
Date, each of the following Directors shall receive an Option
(in the form of an ISO, to the extent permissible under the
Code) to purchase the number of Shares listed below, at an
Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made
to a Director whose Continuous Service terminates on or before
the Effective Date:
Participant Optioned Shares
----------- ---------------
Brad Snider 11,109
O.E. Guinn, Jr. 3,111
Kaneaster Hodges, Jr. 3,111
John Minor 3,111
With respect to each of the above-named Participants, the Option
granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth
in Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) SPECIAL RULES FOR ISOS. The aggregate Market Value,
as of the date the Option is granted, of the Shares with respect
to which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Company or
any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case Options granted in excess of such limitation shall be Non-
ISOs.
A-4
7. EXERCISE PRICE FOR OPTIONS.
(a) LIMITS ON COMMITTEE DISCRETION. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.
(b) STANDARDS FOR DETERMINING EXERCISE PRICE. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average
of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the
Market Value per Share shall be the mean between the bid and
asked price on such date, or, if there is no bid and asked price
on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) GENERALLY. Each Option granted on the Effective
Date shall be exercisable immediately. With respect to Options
granted after the Effective Date, the Committee shall have the
discretion to condition its exercisability on any events that
the Committee may set forth in the Agreement granting the
Option, provided that vesting shall accelerate to 100% upon a
Change in Control (or, if earlier, the execution of a written
agreement to effect a Change in Control). An Option may not be
exercised for a fractional Share.
(b) PROCEDURE FOR EXERCISE. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number
of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which
the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at its executive offices. Common Stock utilized in full
or partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised. Upon a
Participant's exercise of an Option, the Company may, in the
discretion of the Committee, pay to the Participant a cash
amount up to but not exceeding the amount of dividends, if any,
declared on the underlying Shares between the date of grant and
the date of exercise of the Option.
(c) PERIOD OF EXERCISABILITY. Except to the extent
otherwise provided in the terms of an Agreement, an Option may
be exercised by a Participant only while he is an Employee or
Director and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of
such Continuous Service (but not later than the date on which
the Option would otherwise expire, and the Participant must
exercise an ISO within three months after termination of
Continuous Service in order to preserve the Option as an ISO),
except if the Employee's or Director's Continuous Service
terminates by reason of --
(1) "Just Cause" which for purposes hereof shall
have the meaning set forth in any unexpired employment or
severance agreement between the Participant and the Bank
and/or the Company (and, in the absence of any such
agreement, shall mean termination because of the
Employee's or Director's personal dishonesty,
incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or
regulation (other than traffic violations
A-5
or similar offenses) or final cease-and-desist order), then
the Participant's rights to exercise such Option shall
expire on the date of such termination;
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option
immediately prior to his death, such Option of the
deceased Participant may be exercised within two years
from the date of his death (but not later than the date on
which the Option would otherwise expire) by the personal
representatives of his estate or person or persons to whom
his rights under such Option shall have passed by will or
by laws of descent and distribution;
(3) Disability, then to the extent that the
Participant would have been entitled to exercise the
Option immediately prior to his or her Disability, such
Option may be exercised within one year from the date of
termination of employment due to Disability, but not later
than the date on which the Option would otherwise expire.
(d) EFFECT OF THE COMMITTEE'S DECISIONS. The Committee's
determination whether a Participant's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(e) MANDATORY SIX-MONTH HOLDING PERIOD. Notwithstanding
any other provision of this Plan to the contrary, common stock
of the Company that is purchased upon exercise of an Option or
SAR may not be sold within the six-month period following the
grant of that Option or SAR.
9. [RESERVED FOR FUTURE USE]
10. SARS (STOCK APPRECIATION RIGHTS)
(a) GRANTING OF SARS. In its sole discretion, the
Committee may from time to time grant SARs to Employees either
in conjunction with, or independently of, any Options granted
under the Plan. An SAR granted in conjunction with an Option
may be an alternative right wherein the exercise of the Option
terminates the SAR to the extent of the number of shares
purchased upon exercise of the Option and, correspondingly, the
exercise of the SAR terminates the Option to the extent of the
number of Shares with respect to which the SAR is exercised.
Alternatively, an SAR granted in conjunction with an Option may
be an additional right wherein both the SAR and the Option may
be exercised. An SAR may not be granted in conjunction with an
ISO under circumstances in which the exercise of the SAR affects
the right to exercise the ISO or vice versa, unless the SAR, by
its terms, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the Market
Value of the Shares subject to the ISO at the time
the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may
be exercised; and
(5) The SAR may be exercised only when the Market
Value of the Shares subject to the ISO exceeds the
Exercise Price of the ISO.
(b) EXERCISE PRICE. The Exercise Price as to any
particular SAR shall not be less than the Market Value of the
Optioned Shares on the date of grant.
A-6
(c) TIMING OF EXERCISE. The provisions of Paragraph
8(c) regarding the period of exercisability of Options are
incorporated by reference herein, and shall determine the period
of exercisability of SARs.
(d) EXERCISE OF SARS. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the excess of the then
aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the
aggregate Exercise Price of such number of Optioned Shares.
This amount shall be payable by the Company, in the discretion
of the Committee, in cash or in Shares valued at the then Market
Value thereof, or any combination thereof.
(e) PROCEDURE FOR EXERCISING SARS. To the extent not
inconsistent herewith, the provisions of Paragraph 8(b) as to
the procedure for exercising Options are incorporated by
reference, and shall determine the procedure for exercising
SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE
PLAN.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for
any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapita-
lization, reorganization, reclassification, stock dividend,
split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE
SURVIVING ENTITY. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Awards, together with the
Exercise Prices thereof, shall be equitably adjusted for any
change or exchange of Shares for a different number or kind of
shares or other securities which results from the Transaction.
(c) SPECIAL RULE FOR ISOS. Any adjustment made pursuant
to subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(d) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR
DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the Shares pursuant to the
Award before the adjustment was made.
(e) OTHER ISSUANCES. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares or stock of another class, for cash or property or for
labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect,
and no adjustment shall be made with respect to, the number,
class, or Exercise Price of Shares then subject to Awards or
reserved for issuance under the Plan.
(f) CERTAIN SPECIAL DIVIDENDS. The Exercise Price of
shares subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return
A-7
of capital to the stockholders, except that this subparagraph
(f) shall not apply to any dividend which is paid to the
Participant pursuant to Paragraph 8(b) or 9(b) hereof.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant
who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of
one or more of these individuals. Awards so transferred may
thereafter be transferred only to the Participant who originally
received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant
to this Paragraph 12. Awards which are transferred pursuant to
this Paragraph 12 shall be exercisable by the transferee
according to the same terms and conditions as applied to the
Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the deter-
mination of granting such Award, and the Effective Date. Notice
of the determination shall be given to each Participant to whom
an Award is so granted within a reasonable time after the date
of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective December 19, 1998, provided
that the effectiveness of the Plan and any Option shall be
absolutely contingent upon the Plan's approval by a favorable
vote of stockholders owning at least a majority of the total
votes cast at a duly called meeting of the Company's
stockholders held in accordance with applicable laws. No Awards
may be made prior to approval of the Plan by the stockholders of
the Company.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may autho-
rize the Committee to direct execution of an instrument
providing for the modification of any outstanding Award,
provided no such modification shall confer on the holder of said
Award any right or benefit which could not be conferred on him
by the grant of a new Award at such time, or impair the Award
without the consent of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the
Plan and, with respect to any Shares at the time not subject to
Awards, suspend or terminate the Plan. No amendment, suspension
or termination of the Plan shall, without the consent of any
affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) COMPLIANCE WITH SECURITIES LAWS. Shares of Common
Stock shall not be issued with respect to any Award unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) SPECIAL CIRCUMSTANCES. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of
any liability in respect of the non-issuance or sale of such
Shares. As a condition to the
A-8
exercise of an Option or SAR, the Company may require the person
exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an
exemption from the registration requirements of federal or state
securities law.
(c) COMMITTEE DISCRETION. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise
of Options and/or SARs shall be subject to the Participant's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares
that he already owns, having a value equal to the amount
required to be withheld. The value of the Shares to be
withheld, or delivered to the Company, shall be based on the
Market Value of the Shares on the date the amount of tax to be
withheld is to be determined. As an alternative, the Company
may retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility
to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee,
Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations.
Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Award
or, having received an Award, the right to again be granted an
Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award
or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the State of Arkansas, except to the extent
that federal law shall be deemed to apply.
A-9
Exhibit B
NORTH ARKANSAS BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the
terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the
Committee, each member of the Committee hereby accepts his or
her appointment hereunder upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain
personnel of experience and ability in key positions of
responsibility by providing Employees and Directors of the
Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past
contributions to the Bank, and as an incentive to make such
contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan
with an initial capital letter, shall have the meanings set
forth below unless the context clearly indicates otherwise.
Wherever appropriate, the masculine pronoun shall include the
feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Internal
Revenue Code of 1986, as amended.
3.02 "Bank" means Newport Federal Savings Bank.
3.03 "Beneficiary" means the person or persons designated
by a Participant to receive any benefits payable under the Plan
in the event of such Participant's death. Such person or
persons shall be designated in writing on forms provided for
this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence
of a written designation, the Beneficiary shall be the
Participant's surviving spouse, if any (or if none, his estate).
3.04 "Board" means the Board of Directors of the Company.
3.05 "Change in Control" means any one of the following
events: (1) the acquisition of ownership, holding or power to
vote more than 25% of the Bank's or the Company's voting stock,
(2) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors, (3) the
acquisition of a controlling influence over the management or
policies of the Bank or the Company by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Securities Exchange Act of 1934), (4) the acquisition of control
of the Bank or the Company within the meaning of 12 C.F.R. Part
574 or its applicable equivalent (except in the case of (1),
(2), (3) and (4) hereof, ownership or control of the Bank by the
Company itself shall not constitute a "Change in Control"), or
(5) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period
constitute the Board of Directors of the Company or the Bank
(the "Existing Board") cease
B-1
for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the Existing Board was approved by a
vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes
of this subparagraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The decision of the Committee as to
whether a change in control has occurred shall be conclusive and
binding.
3.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock of
the Company.
3.08 "Company" means North Arkansas Bancshares, Inc.
3.09 "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
3.10 "Date of Conversion" means the date of the
conversion of the Bank from mutual to stock form.
3.11 "Director" means a member of the Board, and any
member of the board of directors of any Affiliate that the Board
has by resolution designated as being eligible for participation
in this Plan.
3.12 "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
3.13 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07
hereof.
3.14 "Employee" means any person who is employed by the
Company or an Affiliate.
3.15 "Non-Employee Director" shall have the meaning
provided in Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
3.16 "Participant" means an Employee or Director who
holds a Plan Share Award.
3.17 "Plan" means this North Arkansas Bancshares, Inc.
Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in
the Trust which are awarded or issuable to a Participant
pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this
Plan to receive Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common
Stock held by the Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement
entered into pursuant to the terms hereof between the Company
and the Trustee, and "Trust" means the trust created thereunder.
B-2
3.22 "Trustee" means that person(s) or entity appointed
by the Board pursuant to the Trust Agreement to hold legal title
to the Plan assets for the purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month
period, measured from the date of a Plan Share Award and each
annual anniversary of that date, during which a Participant's
Continuous Service has not terminated for any reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall
be administered and interpreted by the Committee, which shall
consist of not less than two members of the Board who are Non-
Employee Directors. In the absence at any time of a duly
appointed Committee, the Plan shall be administered by those
members of the Board who are Non-Employee Directors, and by the
Board if there are less than two Non-Employee Directors.
The Committee shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by
the express provisions of the Plan or by resolutions adopted by
the Board, the Committee shall have sole and complete authority
and discretion (i) to make Plan Share Awards to such Employees
as the Committee may select, (ii) to determine the form and
content of Plan Share Awards to be issued under the Plan, (iii)
to interpret the Plan, (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan, and (v) to make
other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may
exercise such other power and authority as may be delegated to
it by the Board from time to time. Subject to Section 4.02, the
interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Committee shall act
by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan
to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the
Board one or more persons or entity to act as Trustee(s) in
accordance with the provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee
shall be appointed or approved by, and will serve at the
pleasure of, the Board. The Board may in its discretion from
time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to
it in this and other Sections of the Plan, may take any action
under or with respect to the Plan which the Committee is
authorized to take, and may reverse or override any action taken
or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan
Share Award already made or impair a participant's vested rights
under a Plan Share Award. With respect to all actions taken by
the Board in regard to the Plan, such action shall be taken by a
majority of the Board where such a majority of the directors
acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or
the Committee or the Trustee(s) shall be liable for any
determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member
of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or
not done by him in such capacity under or with respect to the
Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
B-3
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall
determine the amounts (or the method of computing the amounts)
to be contributed by the Company to the Trust, provided that the
Bank may also make contributions to the Trust. Such amounts
shall be paid to the Trustee at the time of contribution. No
contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE
AWARDS. The Trustee shall invest Trust assets only in
accordance with the Trust Agreement; provided that the Trust
shall not purchase, and Plan Share Awards shall not be made with
respect to more than 7,406 Shares (with such number being
subject to adjustment pursuant to Section 8.01(a) hereof, and
increased to the extent necessary to permit the purchase of
Shares with any dividends accrued pursuant to Section 7.02
hereof). Such shares may be newly issued Shares, treasury
Shares, or Shares held in a grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON
PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Shares subject to the Awards so allocated. Any
Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. The Committee may make Plan Share
Awards to Employees and Directors. In selecting those
individuals to whom Plan Share Awards will be granted and the
number of shares covered by such Awards, the Committee shall
consider the position, duties and responsibilities of the
eligible individuals, the value of their services to the Company
and its Affiliates, and any other factors the Committee may deem
relevant.
6.02 ALLOCATIONS. The Committee will determine which
Employees and Directors will be granted discretionary Plan Share
Awards, and the number of Shares covered by each Plan Share
Award, provided that in no event shall any Awards be made which
will violate the governing instruments of the Bank or its
Affiliates or any applicable federal or state law or regulation.
In the event Plan Shares are forfeited for any reason or
additional shares of Common Stock are purchased by the Trustee,
the Committee may, from time to time, determine which of the
individuals referenced in Section 6.01 above will be granted
additional Plan Share Awards to be awarded from the forfeited or
acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable
after a determination is made pursuant to Section 6.02 that a
Plan Share Award is to be made, the Committee shall notify the
Participant in writing of the grant of the Award, the number of
Plan Shares covered by the Award, and the terms upon which the
Plan Shares subject to the Award may be earned. The date on
which the Committee so notifies the Participant shall be
considered the date of grant of the Plan Share Awards. The
Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
B-4
6.04 AUTOMATIC GRANTS TO DIRECTORS. On the Effective
Date, each of the following individuals shall receive a Plan
Share Award as to the number of Plan Shares listed below,
provided that such award shall not be made to an individual who
is not a Director on the Effective Date:
Director Shares Subject to Plan Share Award
-------- ----------------------------------
Brad Snider 1,852
O.E. Guinn, Jr. 518
Kaneaster Hodges, Jr. 518
John Minor 518
Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the
general rules set forth in subsections (a) and (b) of Section
7.01, and the Committee shall have no discretion to alter said
vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other
provisions of this Plan.
6.05 ALLOCATIONS NOT REQUIRED. Notwithstanding anything
to the contrary in Sections 6.01 and 6.02, but subject to
Section 6.04, no Employee or Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards
being at the total discretion of the Committee, nor shall any
Employees or Directors as a group have such a right. The
Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share
Reserve to the Company at any time, and cease issuing Plan Share
Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Committee
specifically eliminates any vesting requirement or imposes a
different vesting schedule, 33 1/3% of the Plan Shares subject
to a Plan Share Award shall be earned and become non-forfeitable
by the Participant upon the Effective Date and an additional 33
1/3% of the Plan Shares subject to a Plan Share Award shall be
earned and become non-forfeitable upon the Participant's
completion of each of two Years of Service after the date of the
Award.
(b) ACCELERATION FOR TERMINATIONS DUE TO
RETIREMENT, DEATH, DISABILITY, OR CHANGE IN CONTROL.
Notwithstanding the general rule contained in Section 7.01(a)
above: (i) all Plan Shares subject to a Plan Share Award held by
a Participant whose service with the Company or an Affiliate
terminates due to the Participant's retirement at or after age
65, death, or Disability shall be deemed earned and 100% vested
as of the Participant's last day of service with the Company or
an Affiliate, and (ii) all Plan Shares subject to a Plan Share
Award held by a Participant shall be deemed earned and 100%
vested as of a Change in Control or, if earlier, the execution
of an agreement to effect a Change in Control.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid
to a Participant or Beneficiary under Section 7.03, such
Participant or Beneficiary shall also be entitled to receive,
with respect to each Plan Share paid, an amount equal to any
cash dividends (including special large and nonrecurring
dividends, including one that has the effect of a return of
capital to the Company's stockholders) and a number of shares of
Common Stock equal to any stock dividends, declared and paid
with respect to a share of Common Stock between the date the
relevant Plan Share Award was initially granted to such
Participant and the date the Plan Shares are being distributed.
There shall also be distributed an appropriate amount of net
earnings, if any, of the Trust with respect to any cash
dividends so paid out.
B-5
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: General Rule.
Except as provided in subsections (c), and (d) below, the
Trustee shall distribute Plan Shares and accumulated cash from
dividends and interest to the Participant or his Beneficiary, as
the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall
distribute all Plan Shares, together with any shares
representing stock dividends, in the form of Common Stock. One
share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon)
shall be made in cash.
(c) WITHHOLDING. The Trustee shall withhold from
any cash payment made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if
the amount of such cash payment is not sufficient, the Trustee
shall require the Participant or Beneficiary to pay to the
Trustee the amount required to be withheld as a condition of
delivering the Plan Shares. The Trustee shall pay over to the
Company or Affiliate which employs or employed such Participant
any such amount withheld from or paid by the Participant or
Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS.
Notwithstanding subsections (a) and (b) above, no Plan Shares
may be distributed prior to the date which is five (5) years
from the Date of Conversion to the extent the Participant or
Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and
outstanding shares of Common Stock unless such action is
approved in advance by a majority vote of non-employee directors
of the Board. To the extent this limitation would delay the
date on which a Participant receives Plan Shares, the
Participant may elect to receive from the Trust, in lieu of
vested Plan Shares, a cash amount equal to the fair market value
of such Plan Shares. Any Plan Shares remaining undistributed
solely by reason of the operation of this Subsection (d) shall
be distributed to the Participant or his Beneficiary on the date
which is five years from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall
be distributed unless and until all of the requirements of all
applicable law and regulation shall have been fully complied
with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be
required by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common
Stock held by the Trust (whether or not subject to a Plan Share
Award) shall be voted by the Trustee in the same proportion as
the trustee of the Company's Employee Stock Ownership Plan votes
Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner
directed by the Board.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to
December 31st of any year prior to the date on which a
Participant becomes vested in any shares subject to his or her
Plan Share Award, a Participant who is a member of a select
group of management or highly compensated employees (within the
meaning of the Employees' Retirement Income Security Act of
1973) may irrevocably elect, on the form attached hereto as
Exhibit "A" (the "Election Form"), to defer the receipt of all
or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award
(the "Deferred Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES.
The MRP Committee shall establish and maintain an individual
account in the name of each Participant who files an Election
Form for the purpose of tracking deferred earnings attributable
to cash dividends paid on Deferred Shares (the "Cash Account").
On the last day of each fiscal year of the Company, the
Committee shall credit to the Participant's Cash Account
earnings on the balance of the Cash Account at a rate equal to
the dividend-adjusted total return on Common Stock, as
determined from time
B-6
to time by the MRP Committee in its sole discretion. The
Trustees shall hold each Participant's Deferred Shares and
Deferred Earnings in the Trust until distribution is required
pursuant to the election set forth in the Participant's Election
Form.
(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee
shall distribute a Participant's Deferred Shares and Deferred
Earnings in accordance with the Participant's Election Form.
All distributions made by the Company and/or the Trustees
pursuant to elections made hereunder shall be subject to
applicable federal, state, and local tax withholding and to such
other deductions as shall at the time of such payment be
required under any income tax or other law, whether of the
United States or any other jurisdiction, and, in the case of
payments to a beneficiary, the delivery to the Committee and/or
Trustees of all necessary waivers, qualifications and other
documentation. Within 90 days after receiving notice of a
Participant's death, the Trustee shall distribute any balance of
the Participant's Deferred Shares and Deferred Earnings to the
Participant's designated beneficiary, if living, or if such
designated beneficiary is deceased or the Participant failed to
designate a beneficiary, to the Participant's estate. If, on
the other hand, a Participant's Continuous Service terminates
for a reason other than the Participant's death, Disability,
early retirement, or normal retirement, the Participant's
Deferred Shares and Deferred Earnings shall be distributed to
the Participant in a lump sum occurring as soon as reasonably
practicable. The distribution provisions of a Participant's
Election Form shall become irrevocable on the date that occurs
(i) one year before the Participant's termination of Continuous
Service for a reason other than death, and (ii) on the
Participant's death if that terminates the Participant's
Continuous Service.
(d) HARDSHIP WITHDRAWALS. Notwithstanding any
other provision of the Plan or a Participant's Election Form, in
the event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the
Participant may apply to the Committee for an immediate
distribution of all or a portion of his Deferred Shares and
Deferred Earnings. The hardship must result from a sudden and
unexpected illness or accident of the Participant or a dependent
of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of
purposes which are not considered hardships include post-
secondary school expenses or the desire to purchase a residence.
In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation
by insurance or otherwise, or by liquidation of the
Participant's nonessential assets to the extent such liquidation
would not itself cause a severe financial hardship. The amount
of any distribution hereunder shall be limited to the amount
necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship
and the amount which qualifies for distribution, if any, shall
be made by the Committee in its sole discretion. The Committee
may require evidence of the purpose and amount of the need, and
may establish such application or other procedures as it deems
appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A
Participant may not assign his or her claim to Deferred Shares
and Deferred Earnings during his or her lifetime, except in
accordance with Section 8.03 of this Plan. A Participant's right
to Deferred Shares and Deferred Earnings shall at all times
constitute an unsecured promise of the Company to pay benefits
as they come due. The right of the Participant or his or her
beneficiary to receive benefits hereunder shall be solely an
unsecured claim against the general assets of the Company.
Neither the Participant nor his or her beneficiary shall have
any claim against or rights in any specific assets or other fund
of the Company, and any assets in the Trust shall be deemed
general assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The
number and kind of shares which may be purchased under the Plan,
and the number and kind of shares subject to outstanding Plan
Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock
for a different number or kind of shares or other securities of
the Company which results from a merger, consolidation,
recapitaliza-
B-7
tion, reorganization, reclassification, stock dividend,
split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE
SURVIVING ENTITY. In the event of (i) the liquidation or
dissolution of the Company, (ii) a merger or consolidation in
which the Company is not the surviving entity, or (iii) the sale
or disposition of all or substantially all of the Company's
assets (any of the foregoing to be referred to herein as a
"Transaction"), all outstanding Plan Share Awards shall be
adjusted for any change or exchange of shares of Common Stock
for a different number or kind of shares or other securities
which results from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW,
ADDITIONAL, OR DIFFERENT SHARES OR SECURITIES. If, by reason of
any adjustment made pursuant to this Section, a Participant
becomes entitled to new, additional, or different shares of
stock or securities, such new, additional, or different shares
of stock or securities shall thereupon be subject to all of the
conditions and restrictions which were applicable to the shares
pursuant to the Plan Share Award before the adjustment was made.
In addition, the Committee shall have the discretionary
authority to impose on the Shares subject to Plan Share Awards
to Employees such restrictions as the Committee may deem
appropriate or desirable, including but not limited to a right
of first refusal, or repurchase option, or both of these
restrictions.
(d) OTHER ISSUANCES. Except as expressly provided
in this Section, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
shares of Common Stock or stock of another class, for cash or
property or for labor or services either upon direct sale or
upon the exercise of rights or warrants to subscribe therefor,
shall not affect, and no adjustment shall be made with respect
to, the number or class of shares of Common Stock then subject
to Plan Share Awards or reserved for issuance under the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may,
by resolution, at any time amend or terminate the Plan; provided
that no amendment or termination of the Plan shall, without the
written consent of a Participant, impair any rights or
obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance
with this Section 8.02 shall include the power to direct the
Trustee to return to the Company all or any part of the assets
of the Trust, including shares of Common Stock held in the Plan
Share Reserve. However, the termination of the Trust shall not
affect a Participant's right to earn Plan Share Awards and to
receive a distribution of Common Stock relating thereto,
including earnings thereon, in accordance with the terms of this
Plan and the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent
and distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Plan Share
Awards may transfer such Awards to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Plan Share
Awards so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially
transferred the Awards pursuant to this Section 8.03. Plan
Share Awards which are transferred pursuant to this Section 8.03
shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor
any grant of a Plan Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express
or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate
thereof.
B-8
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan
Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed
and construed under the laws of the State of Arkansas to the
extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective
December 19, 1998; provided that the effectiveness of the Plan
and any Plan Share Award shall be absolutely contingent upon the
Plan's approval by a favorable vote of stockholders of the
Company who own at least a majority of the total votes cast at a
duly called meeting of the Company's stockholders held in
accordance with applicable laws. In no event shall Plan Share
Awards be made within one year of the Date of Conversion.
8.08 TERM OF PLAN. This Plan shall remain in effect
until the earlier of (i) termination by the Board, or (ii) the
distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share Awards previously granted,
and such Awards shall remain valid and in effect until they have
been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the
Trust associated with the Plan be treated as a grantor trust of
the Company under the provisions of Section 671 et seq. of the
Code, as the same may be amended from time to time, and (ii)
that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of
general unsecured creditors of the Company, the Plan constitutes
a mere unfunded promise to make benefit payments in the future,
the Plan is unfunded for tax purposes and for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be
maintained in conformity with Revenue Procedure 92-64 (as the
same may be amended from time to time).
B-9
REVOCABLE PROXY
NORTH ARKANSAS BANCSHARES, INC.
NEWPORT, ARKANSAS
________________________________________________________________
ANNUAL MEETING OF STOCKHOLDERS
December 21, 1998
________________________________________________________________
The undersigned hereby appoints O.E. Guinn, Jr.,
Kaneaster Hodges, Jr. and John Minor, with full powers of
substitution, to act as proxies for the undersigned, to vote all
shares of common stock of North Arkansas Bancshares, Inc. (the
"Company") which the undersigned is entitled to vote at the
Annual Meeting of Stockholders (the "Meeting"), to be held at
Newport Federal Savings Bank, 200 Olivia Drive, Newport,
Arkansas, on Monday, December 21, 1998 at 4:00 p.m., local time,
and at any and all adjournments thereof, as follows:
VOTE
FOR WITHHELD
--- --------
1. The election as directors of all
nominees listed below (except as
marked to the contrary below). [ ] [ ]
J. C. McMinn
INSTRUCTION: To withhold your vote
for the nominee, insert his name on the
line provided below.
__________________________
FOR AGAINST ABSTAIN
--- ------- -------
2. Approval of the North Arkansas Bancshares,
Inc. 1998 Stock Option and Incentive Plan. [ ] [ ] [ ]
3. Approval of the North Arkansas Bancshares,
Inc. Management Recognition Plan. [ ] [ ] [ ]
The Board of Directors recommends a vote "FOR" the above-
listed propositions.
________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE NOMINEE FOR DIRECTOR
LISTED ABOVE AND FOR THE OTHER PROPOSITIONS LISTED ABOVE. IF
ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY WILL
BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE WITH THE
DETERMINATION OF THE BOARD OF DIRECTORS. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE
PRESENTED AT THE MEETING. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH RESPECT TO THE
ELECTION OF ANY PERSON AS DIRECTOR WHERE THE NOMINEE IS UNABLE
TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND MATTERS INCIDENT
TO THE CONDUCT OF THE MEETING.
________________________________________________________________
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Meeting or at any adjournment thereof and after notification to
the Secretary of the Company at the Meeting of the stockholder's
decision to terminate this proxy, then the power of said
attorneys and proxies shall be deemed terminated and of no
further force and effect.
The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Annual Meeting of
Stockholders, a proxy statement dated November 20, 1998 and an
annual report.
Dated: _______________________, 1998
__________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in
which this card was mailed. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title.
If shares are held jointly, each holder should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.