SCHEDULE 14A
(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 [ ] Confidential, for use of the Commission
Only (as permitted by Rule 14a 6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Guaranty Federal Bancshares, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LETTERHEAD OF GUARANTY FEDERAL BANCSHARES, INC.]
June 16, 1998
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of Guaranty Federal
Bancshares, Inc. (the "Company"), I cordially invite you to attend a Special
Meeting of Stockholders to be held at the Company's corporate office at 1341
West Battlefield, Springfield, Missouri, on Wednesday, July 22, 1998, at 5:00
p.m. The attached Notice of Special Meeting and Proxy Statement describe the
formal business to be transacted at the Special Meeting.
The Board of Directors of the Company has determined that the matters
to be considered at the Special Meeting, described in the accompanying Notice of
Special Meeting and Proxy Statement, are in the best interest of the Company and
its stockholders. For the reasons set forth in the Proxy Statement, the Board of
Directors unanimously recommends a vote "FOR" each matter to be considered.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN AND
DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ACCOMPANYING POSTAGE-PAID
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
This will not prevent you from voting in person at the Special Meeting, but will
assure that your vote is counted if you are unable to attend the Special
Meeting. YOUR VOTE IS VERY IMPORTANT.
Sincerely,
/s/James E. Haseltine
----------------------------------
James E. Haseltine
President
<PAGE>
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GUARANTY FEDERAL BANCSHARES, INC.
1341 WEST BATTLEFIELD
SPRINGFIELD, MISSOURI 65807
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on July 22, 1998
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NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Meeting") of
Guaranty Federal Bancshares, Inc. (the "Company"), will be held at the Company's
corporate office at 1341 West Battlefield, Springfield, Missouri, on Wednesday,
July 22, 1998, at 5:00 p.m.
The Meeting is for the purpose of considering and acting upon the following
matters:
1. The approval of the Guaranty Federal Bancshares, Inc. 1998 Stock
Option Plan (the "Option Plan"); and
2. The approval of the Guaranty Federal Savings Bank Restricted
Stock Plan (the "Restricted Stock Plan").
The transaction of such other business as may properly come before the
Meeting or any adjournments thereof may also be acted upon. If necessary, the
Meeting will be adjourned to solicit additional proxies with respect to approval
of the Option Plan and the Restricted Stock Plan. The Board of Directors is not
aware of any other business to come before the Meeting.
Action may be taken on any one of the foregoing proposals 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. Pursuant to the
Company's Bylaws, the Board of Directors has fixed the close of business on June
5, 1998, as the record date for determination of the stockholders entitled to
vote at the Meeting and any adjournments thereof.
EACH STOCKHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE MEETING, IS
REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY WITHOUT DELAY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. ANY SIGNED PROXY GIVEN BY THE STOCKHOLDER MAY BE
REVOKED BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN REVOCATION OR A
DULY EXECUTED PROXY BEARING A LATER DATE. ANY STOCKHOLDER PRESENT AT THE MEETING
MAY REVOKE HIS PROXY AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE
MEETING. HOWEVER, IF YOU ARE A STOCKHOLDER WHOSE SHARES ARE NOT REGISTERED IN
YOUR OWN NAME, YOU WILL NEED ADDITIONAL DOCUMENTATION FROM YOUR RECORD HOLDER TO
VOTE PERSONALLY AT THE MEETING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/E. Lorene Thomas
----------------------------------
E. Lorene Thomas
Secretary
Springfield, Missouri
June 16, 1998
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO INSURE A QUORUM AT THE MEETING. A
SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES.
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<PAGE>
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PROXY STATEMENT
OF
GUARANTY FEDERAL BANCSHARES, INC.
1341 WEST BATTLEFIELD
SPRINGFIELD, MISSOURI 65807
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SPECIAL MEETING OF STOCKHOLDERS
July 22, 1998
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GENERAL
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This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Guaranty Federal Bancshares, Inc. (the
"Company") to be used at a Special Meeting of Stockholders of the Company which
will be held at the Company's corporate office at 1341 West Battlefield,
Springfield, Missouri, on July 22, 1998, 5:00 p.m. local time (the "Meeting").
The accompanying Notice of Special Meeting of Stockholders and this Proxy
Statement are being first mailed to stockholders on or about June 16, 1998. The
Company is the parent holding company of Guaranty Federal Savings Bank (the
"Bank"). The Company was formed as a Delaware corporation in September 1997 at
the direction of the Bank to acquire all of the outstanding stock of the Bank
issued in connection with the completion of the Bank's mutual-to-stock
conversion on December 30, 1997 (the "Conversion").
At the Meeting, stockholders will consider and vote upon (1) the
approval of the Guaranty Federal Bancshares, Inc. 1998 Stock Option Plan (the
"Option Plan"), and (2) the approval of the Guaranty Federal Savings Bank
Restricted Stock Plan (the "Restricted Stock Plan"). The Board of Directors
knows of no additional matters that will be presented for consideration at the
Meeting. Execution of a proxy, however, confers on the designated proxyholder
the discretionary authority to vote the shares represented by such proxy in
accordance with their best judgment on such other business, if any, that may
properly come before the Meeting or any adjournment thereof.
The approval of the Option Plan provides for authorizing the issuance
of an additional 434,081 shares of common stock of the Company ("Common Stock")
upon the exercise of stock options to be awarded to officers, directors, key
employees and other persons providing services to the Company or any present or
future parent or subsidiary of the Company from time to time. The approval of
the Restricted Stock Plan provides for authorization to issue up to an
additional 173,632 shares of Common Stock upon awards to personnel of experience
and ability in key positions of responsibility with the Bank and its
subsidiaries from time to time. At the present time, the Bank intends to acquire
the Common Stock, to be awarded under the Restricted Stock Plan, through
open-market purchases. The Restricted Stock Plan has the authority, however, to
buy such Common Stock directly from the Company. Approval of the Option Plan and
the Restricted Stock Plan may be deemed to have certain anti-takeover effects
with regard to the Company. See "Proposal I - Approval of the Option Plan -
Effect of Mergers, Change of Control and Other Adjustments, and -Possible
Dilutive Effects of the Option Plan" and "Proposal II - Approval of the
Restricted Stock Plan - Possible Dilutive Effects of Restricted Stock Plan."
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VOTING AND REVOCABILITY OF PROXIES
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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 above or by the filing of
a later dated proxy prior to a vote being taken on a particular proposal at the
Meeting. A proxy will not be voted if a stockholder attends the Meeting and
votes in person. Proxies solicited by the Board of
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<PAGE>
Directors will be voted in accordance with the directions given therein. Where
no instructions are indicated, signed proxies will be voted "FOR" Proposal I and
"FOR" Proposal II at the Meeting or any adjournment thereof.
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INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
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Employees, officers, and directors of the Company have an interest in
certain matters being presented for stockholder approval. Upon stockholder
approval, employees, officers, and directors of the Company may be granted stock
options and restricted stock awards pursuant to the Option Plan and the
Restricted Stock Plan. The approval of the Option Plan and the Restricted Stock
Plan are being presented as Proposal I and Proposal II, respectively. See
"Voting Securities and Principal Holders Thereof" for information regarding the
number of shares of Common Stock beneficially owned by executive officers and
directors.
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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
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Stockholders of record as of the close of business on June 5, 1998 (the
"Record Date"), are entitled to one vote for each share of common stock of the
Company (the "Common Stock") then held. As of the Record Date, the Company had
6,227,641 shares of Common Stock issued and outstanding.
The certificate of incorporation of the Company ("Certificate of
Incorporation") provides that in no event shall any record owner of any
outstanding Common Stock which is beneficially owned, directly or indirectly, by
a person who beneficially owns in excess of 10% of the then outstanding shares
of Common Stock (the "Limit") be entitled or permitted to any vote with respect
to the shares held in excess of the Limit. Beneficial ownership is determined
pursuant to the definition in the Certificate of Incorporation and includes
shares beneficially owned by such person or any of his or her affiliates (as
such terms are defined in the Certificate of Incorporation), or which such
person or any of his or her affiliates has the right to acquire upon the
exercise of conversion rights or options and shares as to which such person or
any of his or her affiliates or associates have or share investment or voting
power, but neither any employee stock ownership or similar plan of the Company
or any subsidiary, nor any trustee with respect thereto or any affiliate of such
trustee (solely by reason of such capacity of such trustee), shall be deemed,
for purposes of the Certificate of Incorporation, to beneficially own any Common
Stock held under any such plan.
The presence in person or by proxy of at least a majority of the
outstanding shares of Common Stock entitled to vote (after subtracting any
shares held in excess of the Limit) is necessary to constitute a quorum at the
Meeting. With respect to any matter, any shares for which a broker indicates on
the proxy that it does not have discretionary authority as to such shares to
vote on such matter (the "Broker Non-Votes") will be considered present for
purposes of determining whether a quorum is present. In the event there are not
sufficient votes for a quorum or to ratify any proposals at the time of the
Meeting, the Meeting may be adjourned in order to permit the further
solicitation of proxies.
As to matters being proposed for stockholder action as set forth in
Proposal I and Proposal II, the proxy being provided by the Board of Directors
enables a stockholder to check the appropriate box on the proxy to (i) vote
"FOR" the item, (ii) vote "AGAINST" the item, or (iii) vote to "ABSTAIN" on such
item. An affirmative vote of the holders of a majority of the total votes
eligible to be cast at the Meeting, in person or by proxy, is required to
constitute stockholder approval for each of Proposals I and II. Broker Non-Votes
and shares as to which the "ABSTAIN" box is selected on the proxy will have the
effect of a vote against the matter.
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<PAGE>
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 "1934 Act"). The following
table sets forth, as of the Record Date, persons or groups who own more than 5%
of the Common Stock and the ownership of all executive officers and directors of
the Company as a group. Other than as noted below, management knows of no person
or group that owns more than 5% of the outstanding shares of Common Stock at the
Record Date.
<TABLE>
<CAPTION>
Percent of Shares
Amount and Nature of of Common Stock
Name and Address of Beneficial Owner Beneficial Ownership Outstanding
- ------------------------------------ -------------------- -----------
<S> <C> <C>
Guaranty Federal Savings Bank
Employee Stock Ownership Plan ("ESOP")
1341 West Battlefield
Springfield, Missouri 65807 (1) 344,454 5.5%
All directors and officers of the Company as a group
(8 persons) (2) 250,233 4.0%
</TABLE>
-------------------------------------
(1) The ESOP purchased such shares for the exclusive benefit of plan
participants with funds borrowed from the Company. These shares are
held in a suspense account and will be allocated among ESOP
participants annually on the basis of compensation as the ESOP debt is
repaid. The ESOP Committee consisting of certain non-employee directors
or the Board instructs the ESOP Trustee regarding investment of ESOP
plan assets. The ESOP Trustee must vote all shares allocated to
participant accounts under the ESOP as directed by participants.
Unallocated shares and shares for which no timely voting direction is
received, will be voted by the ESOP Trustee as directed by the ESOP
Committee.
(2) Includes shares of Common Stock held directly as well as by spouses or
minor children, in trust and other indirect ownership, over which
shares the individuals effectively exercise sole voting and investment
power, unless otherwise indicated. Excludes 344,454 shares held by the
ESOP over which certain non-employee directors, who serve as trustees
to the ESOP, exercise shared voting and investment power. Such
individuals disclaim beneficial ownership with respect to such shares
held by the ESOP. Includes 45,492 shares of Common Stock that may be
acquired by executive officers through stock options.
The following table sets forth the amount of Common Stock beneficially
owned by each director and each named executive officer of the Company.
<TABLE>
<CAPTION>
Common Stock Beneficially
Owned (1)
--------------------------
Name of Individual Title Shares %
- ------------------ ------------------------------------- --------- ---
<S> <C> <C> <C>
Jack L. Barham Chairman of the Board 25,390(2) *
James E. Haseltine President, CEO and Director 58,493(3) *
Wayne V. Barnes Director 44,376(2) *
George L. Hall Director 7,651(2) *
Ivy L. Rogers Director 12,618(2) *
Gary G. Lipscomb Director 35,393(2) *
</TABLE>
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* Less than 1%.
(1) Beneficial ownership as of June 5, 1998. Includes shares of Common Stock
held directly as well as by spouses or minor children, in trust, and other
indirect ownership, over which shares the individuals effectively exercise
sole or shared voting and investment power, unless otherwise indicated.
(2) Excludes 344,454 shares of Common Stock held under the ESOP for which such
individual serves as either a member of the ESOP Committee or as an ESOP
Trustee. Such individual disclaims beneficial ownership with respect to
shares held in a fiduciary capacity. The ESOP purchased such shares for the
exclusive benefit of ESOP participants with funds borrowed from the
Company. These shares are held in a suspense account and will be allocated
among ESOP
(footnotes continued on following page)
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<PAGE>
participants annually on the basis of compensation as the ESOP debt is
repaid. The Board of Directors has appointed Directors Barham, Barnes,
Hall, Rogers and Lipscomb, to serve on the ESOP Committee and to serve as
ESOP Trustees. The ESOP Committee or the Board instructs the ESOP Trustee
regarding investment of ESOP plan assets. The ESOP Trustees must vote all
shares allocated to participant accounts under the ESOP as directed by ESOP
participants. Unallocated shares and shares for which no timely voting
direction is received will be voted by the ESOP Trustees as directed by the
Board or the ESOP Committee. As of the Record Date, no shares have been
allocated under the ESOP to participant accounts.
(3) Includes 18,462 shares of Common Stock that may be acquired through stock
options.
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DIRECTOR AND EXECUTIVE OFFICER COMPENSATION
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Director Compensation
Each member of the Board of Directors received a yearly fee of $9,000,
payable monthly. Directors do not receive fees for attendance at committee
meetings. During the year ended June 30, 1997, Directors Barham, Barnes, Hall,
Rogers and Lipscomb each received 1,945 shares of restricted Bank stock.
Pursuant to the Conversion, each share of restricted Bank stock was exchanged
for 1.931 shares of restricted Common Stock.
Directors are expected to receive awards of stock options and
restricted stock under the Option Plan and the Restricted Stock Plan upon
stockholder approval of these plans. See "Proposal I -- Approval of the Option
Plan" and "Proposal II -- Approval of the Restricted Stock Plan" herein.
Executive Compensation
The Company has no full time employees, but relies on the employees of
the Bank for the limited services required by the Company. All compensation paid
to officers and employees is paid by the Bank.
Summary Compensation Table. The following table sets forth the cash and
non-cash compensation awarded to or earned by the chief executive officer. No
executive officer of either the Bank or the Company had a salary and bonus
during the fiscal years ended June 30, 1997 or 1996 that exceeded $100,000 for
services rendered in all capacities to the Bank or the Company.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
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Awards
-------------------------
Fiscal
Year Restricted Securities
Name and Ended Other Annual Stock Underlying All Other
Principal Position June 30, Salary Bonus Compensation(1) Award(s)(2) Options Compensation(3)
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<S> <C> <C> <C> <C> <C> <C> <C>
James E. Haseltine 1997 $96,250 $6,510 $11,329 0 0 $11,380
President & CEO 1996 87,228 7,681 11,159 $34,859 9,561 12,963
1995 73,300 7,205 12,074 0 0 10,817
</TABLE>
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(1) Includes Directors' fees of $9,000 for the year ended June 30, 1997,
$8,000 for the year ended June 30, 1996, and $7,000 for the year ended
June 30, 1995, in addition to an automobile allowance.
(2) The Bank granted Mr. Haseltine 3,169 restricted shares during the
fiscal year ended June 30, 1996. As of the date awarded, the restricted
shares were valued at $11.00. The first installment vested on October
18, 1996 and such shares continue to vest at a rate of 20% per year.
Dividends are paid on restricted stock after awards vest. As of June
30, 1997, Mr. Haseltine had 2,535 shares of restricted stock, which had
a value of $42,461 (based on the closing price of $16.75 on June 30,
1997). Pursuant to the Conversion, the restricted shares of Bank stock
granted to Mr. Haseltine were exchanged for 1.931 shares of restricted
Common Stock.
(3) Represents the Bank's accruals pursuant to the pension plan.
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<PAGE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END
OPTION/SAR VALUE TABLE
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year, and FY-End Option/SAR Values
---------------------------------------------------------------------------------
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at FY-End 6/30/97 (#) (1) at FY-End 6/30/97 ($)(1)
Shares Acquired
Name on Exercise (#) Value Realized($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- -------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James E. Haseltine -- -- 1,912/7,649 9,809/39,239
</TABLE>
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(1) Market value of the underlying securities based upon a June 30, 1997
closing Bank stock price of $16.75, minus the exercise price of $11.62
per share. The number of securities underlying options reflect options
to purchase Bank common stock as of June 30, 1997. As part of the
Conversion, options previously granted to Mr. Haseltine were modified,
whereby an option to purchase a share of the Bank's common stock was
modified to reflect an option to purchase 1.931 shares of Common Stock.
Employment Agreements
The Bank has entered into employment agreements with James E.
Haseltine, President and Chief Executive Officer and other executive officers of
the Bank. Mr. Haseltine's employment agreement covers a term of two years. The
agreements will be terminable by the Bank for "just cause" as defined in the
agreements. If the Bank terminates the employee without just cause, the employee
will be entitled to a continuation of the employee's salary from the date of
termination through the remaining term of the agreement. Mr. Haseltine's
employment agreement contains a provision stating that in the event of the
termination of employment in connection with any future change in control of the
Bank, as defined in the agreement, Mr. Haseltine will be paid in a lump sum an
amount equal to 1.99 times Mr. Haseltine's five year average annual taxable
compensation. In addition, the Bank entered into employment agreements with
eight other officers, which will provide a severance payment upon termination
without just cause in the event of a change in control, as defined in the
agreements. The agreements may be renewed annually by the Board of Directors
upon a determination of satisfactory performance within the Board's sole
discretion.
Pension Plan
During the fiscal year ended June 30, 1997, the Bank participated in a
multiemployer defined benefit plan ("Pension Plan"). The Pension Plan was
terminated as of December 12, 1997. Employees who have one year of service and
who have reached age 21 were eligible to participate in the Pension Plan.
Employees are entitled to a normal retirement benefit at age 65 equal to 2%
times years of benefit service times the average annual salary (as defined) for
the five consecutive years of highest salary during benefit service, with annual
1% adjustments for retirees who attain age 66 and older. The Pension Plan
provides for early retirement benefits (commencing as early as age 45),
disability retirement benefits and death benefits. Contributions were determined
using actuarial assumptions. The Bank made all the contributions to the Pension
Plan. Benefits received pursuant to the Pension Plan are not subject to any
deduction for social security or other offset amounts.
Due to changes enacted under the Tax Reform Act of 1986, qualified
pension plans require benefit accruals for any active employee working beyond
age 65 with respect to service completed on or after July 1, 1988. As a result,
the Bank accrued an unfunded liability of $87,005, $139,843 and $192,681 as of
June 30, 1997, 1996 and 1995, respectively, to provide for prior service credit
to its
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<PAGE>
eligible employees. Pension expense was $128,785, $156,013, and $173,889, for
the years ended June 30, 1997, 1996 and 1995, respectively.
The following table illustrates annual pension benefits at age 65 under
the Pension Plan at various levels of compensation and years of service,
assuming 100% vesting of benefits. All retirement benefits illustrated in the
table below are without regard to any Social Security benefits to which a
participant might be entitled. Mr. Haseltine has 14 years of service under the
plan.
Years of Service
------------------------------------------------------------------
5 Year
Average
Salary 5 10 15 20 25 30 35
- ------------ ------ ------- ------ ------ ------- ------- -------
$20,000 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000
40,000 4,000 8,000 12,000 16,000 20,000 24,000 28,000
60,000 6,000 12,000 18,000 24,000 30,000 36,000 42,000
80,000 8,000 16,000 24,000 32,000 40,000 48,000 56,000
100,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000
125,000 12,500 25,000 37,500 50,000 62,500 75,000 87,500
Option Plan
The Board of Directors of the Company has adopted the Option Plan for
the benefit of its directors, officers, and key employees. The Option Plan is
subject to stockholder approval. See "Proposal I -- Approval of the Option Plan"
for a summary of the Option Plan. The Option Plan is included as Exhibit A.
Restricted Stock Plan
The Board of Directors of the Company has adopted a restricted stock
program for the benefit of personnel of experience and ability in key positions
of responsibility with the Bank. The Restricted Stock Plan is subject to
stockholder approval. See "Proposal II -- Approval of the Restricted Stock Plan"
for a summary of the Restricted Stock Plan. The Restricted Stock Plan is
included as Exhibit B.
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PROPOSAL I - APPROVAL OF THE OPTION PLAN
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General
The Company's Board of Directors has adopted the Option Plan. The
Option Plan is subject to approval by the Company's stockholders. Pursuant to
the Option Plan, up to 434,081 shares of Common Stock equal to 10% of the total
Common Stock previously issued in the Conversion are to be reserved under the
Company's authorized but unissued shares for issuance by the Company upon
exercise of stock options to be granted to officers, directors, key employees
and other persons from time to time. The purpose of the Option Plan is to
attract and retain qualified personnel for positions of substantial
responsibility and to provide additional incentive to certain officers,
directors, key employees and other persons to promote the success of the
business of the Company and the Bank. The Option Plan, which shall become
effective upon the date of approval of the Option Plan by the stockholders of
the Company ("Effective Date"), provides for a term of ten years, after which
time no awards may be made. The following summary of the material features of
the Option Plan is qualified in its entirety by reference to the complete
provisions of the Option Plan which is attached hereto as Exhibit A. Such Option
Plan has been drafted to comply with regulations of the Office of Thrift
Supervision ("OTS") applicable to stock
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<PAGE>
benefit plans established or implemented within one year of the date of a
mutual-to-stock conversion transaction.
The Option Plan will be administered by the Board of Directors or a
committee of not less than two non-employee directors appointed by the Company's
Board of Directors and serving at the pleasure of the Board (the "Option
Committee"). Members of the Option Committee shall be deemed "Non- Employee
Directors" within the meaning of Rule 16b-3 pursuant to the 1934 Act. The Option
Committee may select the officers and employees to whom options are to be
granted and the number of options to be granted based upon several factors
including prior and anticipated future job duties and responsibilities, job
performance, the Bank's financial performance and a comparison of awards given
by other institutions that have converted from mutual to stock form. A majority
of the members of the Option Committee shall constitute a quorum and the action
of a majority of the members present at any meeting at which a quorum is present
shall be deemed the action of the Option Committee.
Officers, directors, key employees and other persons who are designated
by the Option Committee will be eligible to receive, at no cost to them, options
under the Option Plan (the "Optionees"). Each option granted pursuant to the
Option Plan shall be evidenced by an instrument in such form as the Option
Committee shall from time to time approve. It is anticipated that options
granted under the Option Plan will constitute either Incentive Stock Options
(options that afford favorable tax treatment to recipients upon compliance with
certain restrictions pursuant to Section 422 of the Internal Revenue Code
("Code") and that do not normally result in tax deductions to the Company) or
Non- Incentive Stock Options (options that do not afford recipients favorable
tax treatment under Code Section 422). Option shares may be paid for in cash,
shares of Common Stock, or a combination of both. The Company will receive no
monetary consideration for the granting of stock options under the Option Plan.
Further, the Company will receive no consideration other than the option
exercise price per share for Common Stock issued to Optionees upon the exercise
of those Options.
Shares issuable under the Option Plan may be from authorized but
unissued shares, treasury shares or shares purchased in the open market. An
Option which expires, becomes unexercisable, or is forfeited for any reason
prior to its exercise will again be available for issuance under the Option
Plan. No Option or any right or interest therein is assignable or transferable
except by will or the laws of descent and distribution. The Option Plan shall
continue in effect for a term of ten years from the Effective Date.
Stock Options
The Option Committee may grant either Incentive Stock Options or
Non-Incentive Stock Options. In general, if an Optionee ceases to serve as an
employee of the Company for any reason other than disability or death, an
exercisable Incentive Stock Option may continue to be exercisable for three
months but in no event after the expiration date of the option, except as may
otherwise be determined by the Option Committee at the time of the award. In the
event of the disability or death of an Optionee during employment, an
exercisable Incentive Stock Option will continue to be exercisable for one year
and two years, respectively, to the extent exercisable by the Optionee
immediately prior to the Optionee's disability or death but only if, and to the
extent that, the Optionee was entitled to exercise such Incentive Stock Options
on the date of termination of employment. The terms and conditions of
Non-Incentive Stock Options relating to the effect of an Optionee's termination
of employment or service, disability, or death shall be such terms as the Option
Committee, in its sole discretion, shall determine at the time of termination of
service, disability or death, unless specifically determined at the time of
grant of such options.
The exercise price for the purchase of Common Stock subject to an
Option may not be less than one hundred percent (100%) of the Fair Market Value
of the Common Stock covered by the Option on the date of grant of such Option.
For purposes of determining the Fair Market Value of the Common
-7-
<PAGE>
Stock, if the Common Stock is traded otherwise than on a national securities
exchange at the time of the granting of an Option, then the exercise price per
share of the Option shall be not less than the mean between the last bid and ask
price on the date the Option is granted or, if there is no bid and ask price on
said date, then on the immediately prior business day on which there was a bid
and ask price. If no such bid and ask price is available, then the exercise
price per share shall be determined in good faith by the Option Committee. If
the Common Stock is listed on a national securities exchange at the time of the
granting of an the Option, then the exercise price per share of the Option shall
be not less than the average of the highest and lowest selling price of the
Common Stock on such exchange on the date such Option is granted or, if there
were no sales on said date, then the exercise price shall be not less than the
mean between the last bid and ask price on such date. If an officer or employee
owns Common Stock representing more than ten percent of the outstanding Common
Stock at the time an Incentive Stock Option is granted, then the exercise price
shall not be less than one hundred and ten percent (110%) of the Fair Market
Value of the Common Stock at the time the Incentive Stock Option is granted. No
more than $100,000 of Incentive Stock Options can become exercisable for the
first time in any one year for any one person. The Option Committee may impose
additional conditions upon the right of an Optionee to exercise any Option
granted hereunder which are not inconsistent with the terms of the Option Plan
or the requirements for qualification as an Incentive Stock Option, if such
Option is intended to qualify as an incentive stock option.
No shares of Common Stock shall be issued upon the exercise of an
Option until full payment has been received by the Company, and no Optionee
shall have any of the rights of a stockholder of the Company until shares of
Common Stock are issued to such Optionee. Upon the exercise of an Option by an
Optionee (or the Optionee's personal representative), the Option Committee, in
its sole and absolute discretion, may make a cash payment to the Optionee, in
whole or in part, in lieu of the delivery of shares of Common Stock. Such cash
payment to be paid in lieu of delivery of Common Stock shall be equal to the
difference between the Fair Market Value of the Common Stock on the date of the
Option exercise and the exercise price per share of the Option. Such cash
payment shall be in exchange for the cancellation of such Option. Such cash
payment shall not be made in the event that such transaction would result in
liability to the Optionee and the Company under Section 16(b) of the 1934 Act,
and regulations promulgated thereunder.
The Option Plan provides that the Board of Directors of the Company may
authorize the Option Committee to direct the execution of an instrument
providing for the modification, extension or renewal of any outstanding option,
provided that no such modification, extension or renewal shall confer on the
Optionee any right or benefit which could not be conferred on the Optionee by
the grant of a new Option at such time, and shall not materially decrease the
Optionee's benefits under the Option without the Optionee's consent, except as
otherwise provided under the Option Plan.
Awards Under the Option Plan
The Board or the Option Committee shall from time to time determine the
officers, Directors, key employees and other persons who shall be granted Awards
under the Plan, the number of Awards to be granted to any Participant under the
Plan, and whether Awards granted to each such Participant under the Plan shall
be Incentive Stock Options and/or Non-Incentive Stock Options. In selecting
Participants and in determining the number of shares of Common Stock subject to
Options to be granted to each such Participant, the Board or the Option
Committee may consider the nature of the services rendered by each such
Participant, each such Participant's current and potential contribution to the
Company and such other factors as may be deemed relevant. Participants who have
been granted an Award may, if otherwise eligible, be granted additional Awards.
In no event shall Shares subject to Options granted to non-employee Directors in
the aggregate under this Plan exceed more than 30% of the total number of Shares
authorized for delivery under this Plan, and no more than 5% of total Plan
shares may be awarded to any individual non-employee Director. In no event shall
Shares subject to
-8-
<PAGE>
Options granted to any Employee exceed more than 25% of the total number of
Shares authorized for delivery under the Plan.
Pursuant to the terms of the Option Plan, Non-Incentive Stock Options
to purchase up to 21,704 shares of Common Stock will be granted to each
non-employee Director of the Company, as of the Effective Date, at an exercise
price equal to the Fair Market Value of the Common Stock on such date of grant.
Options may be granted to newly appointed or elected non-employee Directors
within the sole discretion of the Option Committee, and the exercise price shall
be equal to the Fair Market Value of such Common Stock on the date of grant.
Twenty percent of the Options granted to non-employee Directors on the Effective
Date will be first exercisable commencing on the one year anniversary of
stockholder approval of the Option Plan and 20% annually thereafter, during such
period of service as a Director or a Director Emeritus. Such Options granted to
non-employee Directors will remain exercisable for up to ten years from such
date of grant. Upon the death or disability of a Director or Director Emeritus,
such Options shall be deemed immediately 100% exercisable for their remaining
term. All outstanding option awards shall become immediately exercisable in the
event of a change in control of the Company or the Bank, provided such
accelerated vesting is not inconsistent with applicable OTS regulations at the
time of such change in control. Subject to vesting requirements, if applicable,
except in the event of death or disability of the Optionee, a minimum of six
months must elapse between the date of the grant of an Option and the date of
the sale of the Common Stock received through the exercise of such Option.
The table below presents information related to stock option awards
anticipated to be awarded upon stockholder approval of the Option Plan.
<TABLE>
<CAPTION>
NEW PLAN BENEFIT
OPTION PLAN
-----------
Number of Options
Name and Position Dollar Value(1) to be Granted
- ----------------- --------------- -------------
<S> <C> <C>
Jack L. Barham, Chairman of the Board................. N/A 21,704
James E. Haseltine, President, CEO and
Director............................................ N/A 38,481
William B. Williams, Executive Vice
President and COO................................... N/A 32,639
Dana Elwell, Vice President........................... N/A 25,205
Bruce Winston, Vice President and CFO................. N/A 24,480
Wayne V. Barnes, Director............................. N/A 21,704
George L. Hall, Director.............................. N/A 21,704
Ivy L. Rogers, Director............................... N/A 21,704
Gary G. Lipscomb, Director............................ N/A 21,704
Executive Officer Group (3 persons)................... N/A 95,600
Non-Executive Officer Director Group
(5 persons)......................................... N/A 108,520
Non-Executive Officer Employee Group
(25 persons) ....................................... N/A 198,257
</TABLE>
- --------------------
(1) The exercise price of such Options shall be equal to the Fair Market
Value of the Common Stock on the date of stockholder approval of the
Option Plan. Accordingly, the dollar value of the options was not
determinable at the time of mailing this proxy statement. On June 5,
1998, the last reported sale price of the Common Stock was $12.9375 per
share.
-9-
<PAGE>
Effect of Mergers, Change of Control and Other Adjustments
Subject to any required action by the stockholders of the Company,
within the sole discretion of the Option Committee, the aggregate number of
shares of Common Stock for which Options may be granted hereunder or the number
of shares of Common Stock represented by each outstanding Option will be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Common Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend or any other increase
or decrease in the number of shares of Common Stock effected without the receipt
or payment of consideration by the Company. Subject to any required action by
the stockholders of the Company, in the event of any change in control,
recapitalization, merger, consolidation, exchange of shares, spin-off,
reorganization, tender offer, partial or complete liquidation or other
extraordinary corporate action or event, the Option Committee, in its sole
discretion, shall have the power, prior to or subsequent to such action or
events, to (i) appropriately adjust the number of shares of Common Stock subject
to each Option, the exercise price per share of such Option, and the
consideration to be given or received by the Company upon the exercise of any
outstanding Options; (ii) cancel any or all previously granted Options, provided
that appropriate consideration is paid to the Optionee in connection therewith;
and/or (iii) make such other adjustments in connection with the Option Plan as
the Option Committee, in its sole discretion, deems necessary, desirable,
appropriate or advisable. However, no action may be taken by the Option
Committee which would cause Incentive Stock Options granted pursuant to the
Option Plan to fail to meet the requirements of Section 422 of the Code without
the consent of the Optionee.
The Option Committee will at all times have the power to accelerate the
exercise date of all Options granted under the Option Plan. In the case of a
Change in Control of the Company as determined by the Option Committee, all
outstanding options shall become immediately exercisable. A Change in Control is
defined to include (i) the sale of all, or a material portion, of the assets of
the Company; (ii) the merger or recapitalization of the Company whereby the
Company is not the surviving entity; (iii) a change in control of the Company as
otherwise defined or determined by the OTS or its regulations; or (iv) the
acquisition, directly or indirectly, of the beneficial ownership (within the
meaning of Section 13(d) of the 1934 Act and rules and regulations promulgated
thereunder) of 25% or more of the outstanding voting securities of the Company
by any person, trust, entity, or group. This limitation shall not apply to the
purchase of shares by underwriters in connection with a pubic offering of
Company stock or the purchase of shares of up to 25% of any class of securities
of the Company by a tax qualified employee stock benefit plan which is exempt
from the approval requirements set forth under 12 C.F.R.
ss.574.3(c)(1)(vi).
In the event of a Change in Control, the Option Committee and the Board
of Directors will take one or more of the following actions to be effective as
of the date of such Change in Control: (i) provide that such Options shall be
assumed, or equivalent options shall be substituted, ("Substitute Options") by
the acquiring or succeeding corporation (or an affiliate thereof), provided
that: (A) any such Substitute Options exchanged for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, and (B) the shares of
stock issuable upon the exercise of such Substitute Options shall constitute
securities registered in accordance with the Securities Act of 1933, as amended,
("1933 Act") or such securities shall be exempt from such registration in
accordance with Sections 3(a)(2) or 3(a)(5) of the 1933 Act, (collectively,
"Registered Securities"), or in the alternative, if the securities issuable upon
the exercise of such Substitute Options shall not constitute Registered
Securities, then the Optionee will receive upon consummation of the Change in
Control transaction a cash payment for each Option surrendered equal to the
difference between (1) the Fair Market Value of the consideration to be received
for each share of Common Stock in the Change in Control transaction times the
number of shares of Common Stock subject to such surrendered Options, and (2)
the aggregate exercise price of all such surrendered Options, or (ii) in the
event of a transaction under the terms of which the holders of the Common Stock
will receive upon consummation thereof a cash payment (the "Merger Price") for
each share of Common Stock exchanged in the Change in Control transaction, to
make or to provide for a cash payment to the
-10-
<PAGE>
Optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such Options held by each Optionee (to the
extent then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such surrendered Options in exchange for such
surrendered Options.
The power of the Option Committee to accelerate the exercise of Options
and the immediate exercisability of Options in the case of a Change in Control
of the Company could have an anti-takeover effect by making it more costly for a
potential acquiror to obtain control of the Company due to the higher number of
shares outstanding following the exercise of Options. The power of the Option
Committee to make adjustments in connection with the Option Plan, including
adjusting the number of shares subject to Options and canceling Options, prior
to or after the occurrence of an extraordinary corporate action, allows the
Option Committee to adapt the Option Plan to operate in changed circumstances,
to adjust the Option Plan to fit a smaller or larger company, and to permit the
issuance of Options to new management following extraordinary corporate action.
However, this power of the Option Committee also has an anti-takeover effect, by
allowing the Option Committee to adjust the Option Plan in a manner to allow the
present management of the Company to exercise more options and hold more shares
of the Common Stock, and to possibly decrease the number of Options available to
new management of the Company.
Although the Option Plan may have an anti-takeover effect, the
Company's Board of Directors did not adopt the Option Plan specifically for
anti-takeover purposes. The Option Plan could render it more difficult to obtain
support for stockholder proposals opposed by the Company's Board and management
in that recipients of Options could choose to exercise such Options and thereby
increase the number of shares for which they hold voting power. Also, the
exercise of such Options could make it easier for the Board and management to
block the approval of certain transactions requiring the voting approval of 80%
of the Common Stock in accordance with the Company's Certificate of
Incorporation.
Amendment and Termination of the Option Plan
The Board of Directors may alter, suspend or discontinue the Option
Plan, except that no action of the Board shall increase the maximum number of
shares of Common Stock issuable under the Option Plan, materially increase the
benefits accruing to Optionees under the Option Plan or materially modify the
requirements for eligibility for participation in the Option Plan unless such
action of the Board shall be subject to approval or ratification by the
stockholders of the Company.
Pursuant to regulations of the OTS applicable to stock benefit plans
established or implemented within one year following the completion of a
mutual-to-stock conversion of a federally chartered savings institution such as
the Bank, the Option Plan contains certain restrictions and limitations,
including among others, provisions requiring the vesting of options granted to
occur no more rapidly than ratably over a five year period and the resultant
prohibition against accelerated vesting of option grants upon the occurrence of
an event other than the death or disability of the option holder. The Option
Plan, as adopted, further provides that awards shall vest immediately upon a
Change in Control. Recent OTS interpretive letters permit stock benefit plans to
authorize such accelerated vesting upon a Change in Control, provided that
stockholder ratification of such provision is obtained more than one year
following the completion of the mutual-to-stock conversion. The Board of
Directors intends to seek stockholder ratification of such applicable provisions
related to accelerated vesting of awards upon a Change in Control at a later
date if required by applicable OTS practices. The Company does not have any
present intention to engage in any transaction that would result in the
accelerated vesting of Options as permitted by the Option Plan, however, the
Board has determined that the implementation of such plan provisions is in the
best interests of the stockholders of the Company.
-11-
<PAGE>
Possible Dilutive Effects of the Option Plan
The Common Stock to be issued upon the exercise of Options awarded
under the Option Plan may either be authorized but unissued shares of Common
Stock or shares purchased in the open market. Because the stockholders of the
Company do not have preemptive rights, to the extent that the Company funds the
Option Plan, in whole or in part, with authorized but unissued shares, the
interests of current stockholders will be diluted. If upon the exercise of all
of the Options, the Company delivers newly issued shares of Common Stock (i.e.,
434,081, shares of Common Stock), then the dilutive effect to current
stockholders would be approximately 7%.
Federal Income Tax Consequences
Under present federal tax laws, awards under the Option Plan will have
the following consequences:
1. The grant of an Option will not by itself result in the
recognition of taxable income to an Optionee nor entitle the
Company to a tax deduction at the time of such grant.
2. The exercise of an Option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code generally will not,
by itself, result in the recognition of taxable income to an
Optionee nor entitle the Company to a deduction at the time of
such exercise. However, the difference between the Option
exercise price and the Fair Market Value of the Common Stock on
the date of Option exercise is an item of tax preference which
may, in certain situations, trigger the alternative minimum tax
for an Optionee. An Optionee will recognize capital gain or loss
upon resale of the shares of Common Stock received pursuant to
the exercise of Incentive Stock Options, provided that such
shares are held for at least one year after transfer of the
shares or two years after the grant of the Option, whichever is
later. Generally, if the shares are not held for that period, the
Optionee will recognize ordinary income upon disposition in an
amount equal to the difference between the Option exercise price
and the Fair Market Value of the Common Stock on the date of
exercise, or, if less, the sales proceeds of the shares acquired
pursuant to the Option.
3. The exercise of a Non-Incentive Stock Option will result in the
recognition of ordinary income by the Optionee on the date of
exercise in an amount equal to the difference between the
exercise price and the Fair Market Value of the Common Stock
acquired pursuant to the Option.
4. The Company will be allowed a tax deduction for federal tax
purposes equal to the amount of ordinary income recognized by an
Optionee at the time the Optionee recognizes such ordinary
income.
5. In accordance with Section 162(m) of the Code, the Company's tax
deductions for compensation paid to the most highly paid
executives named in the Company's Proxy Statement may be limited
to no more than $1 million per year, excluding certain
"performance-based" compensation. The Company intends for the
award of Options under the Option Plan to satisfy the
performance-based requirements of Section 162(m) of the Code so
that the Company's deduction for compensation related to the
exercise of Options will not be subject to limitation by Section
162(m) of the Code.
Accounting Treatment
The Company expects to use the "intrinsic value based method" as
prescribed by APB Opinion 25. Accordingly, neither the grant nor the exercise of
an Option under the Option Plan currently requires any charge against earnings
under generally accepted accounting principles. Common Stock issuable pursuant
to outstanding Options which are exercisable under the Option Plan will be
considered outstanding for purposes of calculating earnings per share on a fully
diluted basis.
-12-
<PAGE>
Stockholder Approval
Stockholder approval of the Option Plan is being sought in accordance
with regulations of the OTS. Additional purposes of requesting stockholder
approval of the Option Plan are to qualify the Option Plan for the granting of
Incentive Stock Options in accordance with the Code, to enable Optionees to
qualify for certain exemptive treatment from the short-swing profit recapture
provisions of Section 16(b) of the 1934 Act, and to meet the requirements for
the tax-deductibility of certain compensation items under Section 162(m) of the
Code. An affirmative vote of the holders of a majority of the total votes
eligible to be cast at the Meeting is required to constitute stockholder
approval of this Proposal I.
THE OTS IN NO WAY ENDORSES OR APPROVES THE OPTION PLAN.
A VOTE IN FAVOR OF THE OPTION PLAN ALSO AUTHORIZES THE BOARD OF
DIRECTORS TO AMEND THE OPTION PLAN TO COMPLY WITH ANY FUTURE OTS INTERPRETATIONS
UNDER APPLICABLE REGULATIONS, PROVIDED ANY SUCH AMENDMENTS DO NOT HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY'S STOCKHOLDERS AS A GROUP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
THE OPTION PLAN.
- --------------------------------------------------------------------------------
PROPOSAL II - APPROVAL OF THE RESTRICTED STOCK PLAN
- --------------------------------------------------------------------------------
General
The Board of Directors of the Company has adopted the Restricted Stock
Plan as a method of providing directors, officers, and key employees of the Bank
with a proprietary interest in the Company in a manner designed to encourage
such persons to remain in the employment or service of the Bank. The Bank will
contribute sufficient funds to the Restricted Stock Plan to purchase Common
Stock representing up to 4% of the aggregate number of shares issued in the
Conversion (i.e., 173,632 shares of Common Stock) in the open market.
Alternatively, the Restricted Stock Plan may purchase authorized but unissued
shares of Common Stock or treasury shares from the Company. All of the Common
Stock to be purchased by the Restricted Stock Plan will be purchased at the Fair
Market Value of such stock on the date of purchase. Awards under the Restricted
Stock Plan will be made in recognition of expected future services to the Bank
by its directors, officers and key employees responsible for implementation of
the policies adopted by the Bank's Board of Directors and as a means of
providing a further retention incentive. The following is a summary of the
material features of the Restricted Stock Plan which is qualified in its
entirety by reference to the complete provisions of the Restricted Stock Plan
which is attached hereto as Exhibit B. Such Restricted Stock Plan has been
drafted to comply with regulations of the OTS applicable to stock benefit plans
implemented within one year of the date of a mutual-to-stock conversion
transaction.
Awards Under the Restricted Stock Plan
Benefits under the Restricted Stock Plan ("Plan Share Awards") may be
granted at the sole discretion of a committee comprised of not less than two
directors who are not employees of the Bank or the Company (the "Restricted
Stock Plan Committee") appointed by the Bank's Board of Directors. The
Restricted Stock Plan is managed by trustees (the "Restricted Stock Plan
Trustees") who are non-employee directors of the Bank or the Company and who
have the responsibility to invest all funds contributed by the Bank to the trust
created for the Restricted Stock Plan (the "Restricted Stock Plan Trust").
Unless the terms of the Restricted Stock Plan or the Restricted Stock Plan
Committee specifies otherwise, awards under the Restricted Stock Plan will be in
the form of restricted stock payable as the
-13-
<PAGE>
Plan Share Awards shall be earned and non-forfeitable. Twenty percent (20%) of
such awards shall be earned and non-forfeitable on the one year anniversary of
the date of grant of such awards, and 20% annually thereafter, provided that the
recipient of the award remains an employee, Director or Director Emeritus during
such period. A recipient of such restricted stock will not be entitled to voting
rights associated with such shares prior to the applicable date such shares are
earned. Dividends paid on Plan Share Awards shall be held in arrears and
distributed upon the date such applicable Plan Share Awards are earned. Any
shares held by the Restricted Stock Plan Trust which are not yet earned shall be
voted by the Restricted Stock Plan Trustees, as directed by the Restricted Stock
Plan Committee. If a recipient of such restricted stock terminates employment or
service for reasons other than death, disability, or a change in control of the
Company or the Bank, the recipient forfeits all rights to the awards under
restriction. If the recipient's termination of employment or service is caused
by death, disability, or a change in control of the Company or the Bank
(provided that such accelerated vesting is not inconsistent with applicable
regulations of the OTS at the time of such change in control), all restrictions
expire and all shares allocated shall become unrestricted. Awards of restricted
stock to directors shall be immediately non-forfeitable in the event of the
death or disability of such director, or a change in control of the Company or
the Bank and distributed as soon as practicable thereafter. The Board of
Directors can terminate the Restricted Stock Plan at any time, and if it does
so, any shares not allocated will revert to the Company.
Plan Share Awards under the Restricted Stock Plan will be determined by
the Restricted Stock Plan Committee. In no event shall any Employee receive Plan
Share Awards in excess of 25% of the aggregate Plan Shares authorized under the
Plan. Plan Share Awards may be granted to newly elected or appointed
non-employee Directors of the Bank subsequent to the effective date (as defined
in the Restricted Stock Plan) provided that the Plan Share Awards made to
non-employee directors shall not exceed 30% of total Plan Share Reserve in the
aggregate under the Plan or 5% of the total Plan Share Reserve to any individual
non-employee Director.
The aggregate number of Plan Shares available for issuance pursuant to
the Plan Share Awards and the number of shares to which any Plan Share Award
relates shall be proportionately adjusted for any increase or decrease in the
total number of outstanding shares of Common Stock issued subsequent to the
effective date (as defined in the Restricted Stock Plan) of the Restricted Stock
Plan resulting from any split, subdivision or consolidation of the Common Stock
or other capital adjustment, change or exchange of Common Stock, or other
increase or decrease in the number or kind of shares effected without receipt or
payment of consideration by the Company.
The following table presents information related to the anticipated
award of Common Stock under the Restricted Stock Plan as authorized pursuant to
the terms of the Restricted Stock Plan or the anticipated actions of the
Restricted Stock Plan Committee.
-14-
<PAGE>
<TABLE>
<CAPTION>
NEW PLAN BENEFITS
RESTRICTED STOCK PLAN
---------------------
Name and Position Dollar Value ($)(1) Number of Shares (2)(3)
- ----------------- ------------------- -----------------------
<S> <C> <C>
Jack L. Barham, Chairman of the Board.......... $112,323 8,682
James E. Haseltine, President, CEO &
Director..................................... 271,468 20,983
William B. Williams, Executive Vice
President & COO.............................. 230,262 17,798
Dana Elwell, Vice President.................... 177,813 13,744
Bruce Winston, Vice President & CFO............ 172,690 13,348
Thomas Howard, Vice President.................. 140,708 10,876
Jerry F. Graham, Vice President................ 131,756 10,184
Carla J. Green, Vice President................. 129,194 9,986
Dwight Cruzan, Vice President.................. 127,926 9,888
Kevin Bell, Vice President..................... 113,850 8,800
Wayne V. Barnes, Director...................... 112,323 8,682
George L. Hall, Director....................... 112,323 8,682
Ivy L. Rogers, Director ....................... 112,323 8,682
Gary G. Lipscomb, Director .................... 112,323 8,682
Executive Officer Group (3 persons)............ 674,419 52,129
Non-Executive Officer Director
Group (5 persons)............................ 561,617 43,410
Non-Executive Officer Employee
Group (7 persons)............................ 898,005 69,411
</TABLE>
- -------------
(1) These values are based on the last reported sale price for the Common
Stock on June 5, 1998, which was $12.9375 per share. The exact dollar
value of the Common Stock granted will equal the market price of the
Common Stock on the date of vesting of such awards. Accordingly, the
exact dollar value is not presently determinable.
(2) All Plan Share Awards presented herein shall be earned at the rate of
20% one year after the date of grant and 20% annually thereafter. All
awards shall become immediately 100% vested upon death, disability, or
termination of service following a change in control (as defined in the
Restricted Stock Plan).
(3) Plan Share Awards shall continue to vest during periods of service as
an employee, director, or director emeritus.
Amendment and Termination of the Restricted Stock Plan
The Board may amend or terminate the Restricted Stock Plan at any time.
However, no action of the Board may increase the maximum number of Plan Shares
permitted to be awarded under the Restricted Stock Plan, except for adjustments
in the Common Stock of the Company, materially increase the benefits accruing to
Participants under the Restricted Stock Plan or materially modify the
requirements for eligibility for participation in the Restricted Stock Plan
unless such action of the Board shall be subject to ratification by the
stockholders of the Company.
-15-
<PAGE>
Pursuant to regulations of the OTS applicable to stock benefit plans
established or implemented within one year following the completion of a
mutual-to-stock conversion of a federally chartered savings institution such as
the Bank, the Restricted Stock Plan contains certain restrictions and
limitations, including among others, provisions requiring the vesting of awards
granted to occur no more rapidly than ratably over a five year period and the
resultant prohibition against accelerated vesting of award grants upon the
occurrence of an event other than the death or disability of the option holder.
The Restricted Stock Plan, as adopted, further provides that awards shall vest
immediately upon a Change in Control. Recent OTS interpretive letters authorize
stock benefit plans to permit such accelerated vesting upon a Change in Control,
provided that stockholder ratification of such provision is obtained more than
one year following the completion of the mutual-to-stock conversion. The Board
of Directors intends to seek stockholder ratification of such applicable
provisions related to accelerated vesting of awards upon a Change in Control at
a later date if required by applicable OTS practices. The Company does not have
any present intention to engage in any transaction that would result in the
accelerated vesting of Awards as permitted by the Restricted Stock Plan,
however, the Board has determined that the implementation of such plan
provisions is in the best interests of the stockholders of the Company, as well
as the officers, directors and employees of the Company.
Possible Dilutive Effects of Restricted Stock Plan
The Restricted Stock Plan provides that Common Stock to be awarded may
be acquired by the Restricted Stock Plan through open-market purchases or from
authorized but unissued shares of Common Stock from the Company. In that
stockholders do not have preemptive rights, to the extent that the Company
utilizes authorized but unissued shares to fund Restricted Stock Plan awards,
the interests of current stockholders will be diluted. If all Plan Share Awards
are funded with newly issued shares, the dilutive effect to existing
stockholders would be approximately 2.8%. It is the Company's present intention
to fund the Restricted Stock Plan through open-market purchases of Common Stock.
Federal Income Tax Consequences
Common Stock awarded under the Restricted Stock Plan is generally
taxable to the recipient at the time that such awards become earned and
non-forfeitable, based upon the Fair Market Value of such stock at the time of
such vesting. Alternatively, a recipient may make an election pursuant to
Section 83(b) of the Code to elect to include in gross income for the current
taxable year the Fair Market Value of such award. The Company will be allowed a
tax deduction for federal tax purposes as a compensation expense equal to the
amount of ordinary income recognized by a recipient of Plan Share Awards at the
time the recipient recognizes taxable ordinary income. A recipient of a Plan
Share Award may elect to have a portion of such award withheld by the Restricted
Stock Plan Trust in order to meet any necessary tax withholding obligations.
Accounting Treatment
For accounting purposes, the Company will recognize compensation
expense in the amount of the Fair Market Value of the Common Stock subject to
Plan Share Awards at the grant date pro rata over the period of years during
which the awards are earned.
Stockholder Approval
The Company is submitting the Restricted Stock Plan to stockholders for
approval in accordance with regulations of the OTS. The Restricted Stock Plan
and awards made thereunder will not be effective until receipt of stockholder
approval of Proposal II. Additionally, stockholder approval of the Restricted
Stock Plan will enable recipients of Plan Share Awards to qualify for certain
exemptive treatment from the short-swing profit recapture provisions of Section
16(b) of the 1934 Act. The affirmative vote of
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<PAGE>
holders of a majority of the total votes eligible to be cast at the Meeting is
required to constitute stockholder approval of this Proposal II.
THE OTS IN NO WAY ENDORSES OR APPROVES THE RESTRICTED STOCK PLAN.
A VOTE IN FAVOR OF THE RESTRICTED STOCK PLAN ALSO AUTHORIZES THE BOARD
OF DIRECTORS TO AMEND THE RESTRICTED STOCK PLAN TO COMPLY WITH ANY FUTURE OTS
INTERPRETATIONS UNDER APPLICABLE REGULATIONS, PROVIDED SUCH AMENDMENTS DO NOT
HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S STOCKHOLDERS AS A GROUP.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF
THE RESTRICTED STOCK PLAN.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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Certain Related Transactions
The Bank, like many financial institutions, has followed a policy of
granting various types of loans to officers, directors, and employees. The loans
have been made in the ordinary course of business and on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with the Bank's other customers, and do not involve
more than the normal risk of collectibility, or present other unfavorable
features.
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STOCKHOLDER PROPOSALS
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In order to be eligible for inclusion in the Company's proxy materials
for the Annual Meeting of Stockholders for the fiscal year ending June 30, 1998,
any stockholder proposal to take action at such meeting must be received at the
Company's executive offices at 1341 West Battlefield, Springfield, Missouri
65807, in accordance with 17 C.F.R. ss.240.14a-8 of the Rules and Regulations
under the 1934 Act. Any such proposals shall be subject to the requirements of
Rule 14a-8 under the 1934 Act.
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OTHER MATTERS
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The Board of Directors is not aware of any business to come before the
Meeting other than those matters described in this Proxy Statement. However, if
any other matters should properly come before the Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in accordance
with the judgment of the persons named in the accompanying proxy.
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<PAGE>
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MISCELLANEOUS
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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 may retain the assistance of a third party to aid in the solicitation of
proxies at a cost which is not anticipated to exceed $4,000 plus reimbursement
of certain incurred expenses; however, actual expenses may exceed estimated
costs.
BY ORDER OF THE BOARD OF DIRECTORS
/s/E. Lorene Thomas
----------------------------------
E. Lorene Thomas
Secretary
Springfield, Missouri
June 16, 1998
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<PAGE>
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GUARANTY FEDERAL BANCSHARES, INC.
1341 WEST BATTLEFIELD
SPRINGFIELD, MISSOURI 65807
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SPECIAL MEETING OF STOCKHOLDERS
July 22, 1998
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The undersigned hereby appoints the Board of Directors of Guaranty
Federal Bancshares, Inc. (the "Company"), or its designee, with full powers of
substitution, to act as attorneys and proxies for the undersigned, to vote all
shares of Common Stock of the Company which the undersigned is entitled to vote
at the Special Meeting of Stockholders (the "Meeting"), to be held at the
Company's corporate office at 1341 West Battlefield, Springfield, Missouri, on
Wednesday, July 22, 1998, at 5:00 p.m., local time, and at any and all
adjournments thereof, in the following manner:
FOR AGAINST ABSTAIN
--- ------- -------
1. The approval of the
Guaranty Federal Bancshares, Inc.
1998 Stock Option Plan. |_| |_| |_|
2. The approval of the
Guaranty Federal Savings Bank
Restricted Stock Plan. |_| |_| |_|
In their discretion, such attorneys and proxies are authorized to vote upon such
other business as may properly come before the Meeting or any adjournments
thereof. If necessary, the Meeting will be adjourned to solicit additional
proxies with respect to approval of the Guaranty Federal Bancshares, Inc. 1998
Stock Option Plan and the Guaranty Federal Savings Bank Restricted Stock Plan.
The Board of Directors recommends a vote "FOR" all of the above listed
propositions.
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THIS SIGNED PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS SIGNED PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED.
IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS SIGNED PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME,
THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE
MEETING.
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<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the Meeting, or
at any adjournments thereof, and after notification to the Secretary of the
Company at the Meeting of the stockholder's decision to terminate this Proxy,
the power of said attorneys and proxies shall be deemed terminated and of no
further force and effect. The undersigned may also revoke this Proxy by filing a
subsequently dated Proxy or by written notification to the Secretary of the
Company of the stockholder's decision to terminate this Proxy.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Special Meeting of Stockholders and a
Proxy Statement dated June 16, 1998.
Dated:
----------------------
- --------------------------------- --------------------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
- --------------------------------- --------------------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on this Proxy. When signing as
attorney, executor, administrator, trustee, or guardian, please give your full
title. If shares are held jointly, each holder should sign.
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PLEASE COMPLETE, DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
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