<PAGE> 1
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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
FIRST UNITED BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(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)(4) 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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
FIRST UNITED BANCSHARES, INC.
EL DORADO, ARKANSAS 71730
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 1999
To The Stockholders of First United Bancshares, Inc.:
Notice is hereby given that the Annual Meeting of the Stockholders of First
United Bancshares, Inc. ("the Company") will be held in the First National
Building, El Dorado, Arkansas, on Tuesday, May 25, 1999, at 2:00 p.m. Central
Daylight Time, for the following purposes:
(1) To elect the board of directors who will serve until the next
annual meeting of stockholders;
(2) To ratify the appointment of Arthur Andersen LLP as the
independent auditors of the Company until the next annual meeting of
stockholders;
(3) To consider and adopt the First United Bancshares, Inc. 1999
Employees' Long-Term Incentive Plan; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only stockholders of record as of the close of business on March 25, 1999
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof. Stockholders are cordially invited to attend the Annual
Meeting in person.
By Order of the Board of Directors
/s/ JAMES V. KELLEY
------------------------------------
James V. Kelley
Chairman of the Board, President and
Chief Executive Officer
El Dorado, Arkansas
April 20, 1999
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR
SHARES MAY BE VOTED IN ACCORDANCE WITH YOUR WISHES AND IN ORDER THAT THE
PRESENCE OF A QUORUM MAY BE ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT
YOUR RIGHT TO REVOKE IT LATER OR VOTE YOUR SHARES IN PERSON IN THE EVENT YOU
SHOULD ATTEND THE ANNUAL MEETING. THE PROMPT RETURN OF YOUR SIGNED PROXY,
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD, WILL AID THE COMPANY IN REDUCING
THE EXPENSE OF ADDITIONAL PROXY SOLICITATION.
<PAGE> 3
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SOLICITATION OF PROXY....................................... 1
REVOCATION OF PROXY......................................... 1
VOTING RIGHTS OF THE COMPANY'S SECURITIES
General................................................... 1
Cumulative Voting for Election of Directors............... 1
Method of Voting.......................................... 2
ELECTION OF DIRECTORS
General................................................... 2
Vote Required For Election................................ 2
Nominees for Directors.................................... 3
Director Nomination and Qualification..................... 4
Meetings and Committees of the Board...................... 4
Compensation of Directors................................. 5
Compliance with Section 16(a) of the Securities and
Exchange Act of 1934................................... 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS......... 5
PROPOSAL TO ADOPT THE FIRST UNITED BANCSHARES, INC. 1999
EMPLOYEES' LONG-TERM INCENTIVE PLAN....................... 6
EXECUTIVE COMPENSATION AND CERTAIN SECURITY HOLDERS
Report of Compensation, ESOP and Benefits Committee
Compensation Policy.................................... 11
Measures of Performance................................ 11
Executive Compensation................................. 11
Compensation of Chief Executive Officer................ 12
Stock Performance......................................... 13
Compensation of Management................................ 13
Outstanding Voting Securities and Principal Holders
Thereof................................................ 16
Security Ownership of Directors and Executive Officers.... 17
Option Grants in 1998..................................... 19
Option Exercises in 1998 and 1998 Year-End Option
Values................................................. 20
Executive Agreements...................................... 20
TRANSACTIONS WITH MANAGEMENT AND OTHERS..................... 21
ANNUAL REPORT............................................... 21
OTHER MATTERS............................................... 22
STOCKHOLDER PROPOSALS....................................... 22
</TABLE>
<PAGE> 4
FIRST UNITED BANCSHARES, INC.
MAIN AND WASHINGTON STREETS
EL DORADO, ARKANSAS 71730
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 1999
SOLICITATION OF PROXIES
Each holder of record of Common Stock of First United Bancshares, Inc.
("the Company") as of the close of business on March 25, 1999 ("Record Date"),
is entitled to vote at the Annual Meeting of Stockholders to be held in the
First National Bank Building, Main and Washington Streets, El Dorado, Arkansas
on Tuesday, May 25, 1999 at 2:00 p.m., and any adjournment thereof (the
"Meeting"). A proxy card is enclosed for use at such Meeting if you are unable
to attend in person. The persons named therein as proxies were selected by the
Board of Directors of the Company and the proxy is solicited on behalf of the
Board of Directors of the Company.
This Proxy Statement and the accompanying Proxy Card are first being mailed
to stockholders on or about April , 1999. Such solicitation is being made by
mail and may also be made in person or by telephone or telegraph by officers,
directors or regular employees of the Company who will not be specially
compensated for such additional solicitation, if necessary. All expenses
incurred in such solicitation, including the reimbursement of certain
fiduciaries for expenses incurred by them in forwarding the proxy solicitation
materials to the beneficial owners of the Company's Common Stock held of record
by such fiduciaries, will be borne by the Company.
REVOCATION OF PROXY
The Company encourages the personal attendance of stockholders at the
Meeting, and the giving of the Proxy does not preclude the right to vote in
person should the person giving the Proxy so desire. THE PERSON GIVING THE PROXY
HAS THE POWER TO REVOKE THE SAME BEFORE THE PROXY IS EXERCISED BY GIVING WRITTEN
NOTICE OF REVOCATION PRIOR TO THE ANNUAL STOCKHOLDERS MEETING TO CYNTHIA C.
ALPHIN, ASSISTANT SECRETARY, AT FIRST UNITED BANCSHARES, INC., MAIN AND
WASHINGTON STREETS, EL DORADO, ARKANSAS 71730. FURTHERMORE, A PROXY WILL BE
SUSPENDED IF THE STOCKHOLDER WHO EXECUTED IT IS PRESENT AT THE MEETING AND
ELECTS TO VOTE IN PERSON.
VOTING RIGHTS OF THE COMPANY'S SECURITIES
GENERAL
The Common Stock of the Company is its only class of voting securities. At
the Meeting, each Stockholder will be entitled to one vote, in person or by
proxy, for each share of Common Stock owned of record as of the close of
business on March 25, 1999. On the Record Date, there were outstanding and
entitled to vote 25,294,296 shares of Common Stock. The stock transfer books of
the Company will not be closed.
CUMULATIVE VOTING FOR ELECTION OF DIRECTORS
With respect to the election of directors, every Stockholder of the Company
has cumulative voting rights. Such rights provide that every Stockholder
entitled to vote at such election should have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
directors to be elected, or to cumulate his votes by giving one nominee as many
votes as the number of such directors
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<PAGE> 5
multiplied by the number of his shares shall equal, or by distributing such
votes on the same principle among any number of such nominees as the Stockholder
may desire.
METHOD OF VOTING
The enclosed Proxy Card provides a method for Stockholders to withhold
authority to vote for any one or more of the nominees while granting authority
to the proxies to vote for the remaining nominees. The names of all nominees are
listed on the Proxy Card. If you wish to grant the proxies authority to vote for
all nominees, check the box marked "FOR" above the names of the nominees. If you
wish to withhold authority to vote for all nominees, check the box marked
"WITHHOLD AUTHORITY" above the names of the nominees. If you wish your shares to
be voted for some nominees and not for one or more of the nominees, indicate the
name(s) of the nominee(s) for whom you are withholding the authority to vote by
drawing a line through such name(s). The Board of Directors anticipates that
this method of electing directors will make the voting process more meaningful
to the Stockholders of the Company.
The enclosed Proxy Card also provides a method for Stockholders to abstain
from voting on each matter. By abstaining, shares will not be voted for or
against such particular matter but will be counted for quorum purposes. If you
wish to abstain from voting on any matter, check the box marked "ABSTAIN". While
there may be instances in which a Stockholder will wish to abstain, the Board of
Directors encourages all Stockholders to vote their shares in their best
judgment and to participate in the voting process to the fullest extent
possible.
ELECTION OF DIRECTORS
GENERAL
At the Meeting, fifteen (15) directors, which shall constitute the entire
Board of Directors of the Company for the ensuing year, will be elected to hold
office until the next Annual Meeting of Stockholders or until their successors
have been duly elected and qualified. The following persons have been nominated
for election as directors: E. Larry Burrow, Claiborne P. Deming, Al Graves, Jr.,
Tommy Hillman, James V. Kelley, Roy E. Ledbetter, Michael F. Mahony, Richard H.
Mason, Jack W. McNutt, George F. Middlebrook, III, R. Madison Murphy, Robert C.
Nolan, Cal Partee, Jr., Carolyn Tennyson and John D. Trimble, Jr. Should any of
the nominees become unavailable for election for any reason, presently unknown,
or be unable to serve, the persons named as proxies in the enclosed Proxy Card
will vote for the election of such other person or persons as the Board of
Directors may recommend.
If the enclosed Proxy Card is duly executed, dated and received in time for
the Meeting, it will be voted in accordance with the instructions of the
stockholder(s). IF NO INSTRUCTIONS ARE INDICATED, THEN IT IS THE INTENTION OF
THE PERSONS NAMED AS PROXIES TO VOTE THE SHARES REPRESENTED THEREBY TO ELECT THE
FIFTEEN PERSONS NOMINATED FOR ELECTION AS DIRECTORS OF THE COMPANY.
VOTE REQUIRED FOR ELECTION
Directors are elected by plurality of the votes cast by holders of shares
of common stock represented either in person or by proxy, at the annual meeting.
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<PAGE> 6
NOMINEES FOR ELECTION AS DIRECTORS
The following table represents certain information with respect to each
nominee for director of the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE BUSINESS EXPERIENCE SINCE(1)
- ---- --- ------------------- --------
<S> <C> <C> <C>
E. Larry Burrow(2)........... 64 Plant Manager of Partee Flooring Mill, Oil and 1983
Timber Investments, principally engaged in
Oil and Lumber Production, Director of First
Land and Investment Company
Claiborne P. Deming(3)....... 44 Director, President and Chief Executive Officer 1987
of Murphy Oil Corporation, principally engaged
in Oil and Gas Exploration and Production
Al Graves, Jr.(4)............ 62 Partner of Graves & Graves, Attorneys at Law 1998
Tommy Hillman................ 62 President of Winrock Farms, Inc. 1997
James V. Kelley.............. 49 Chairman of the Board, President and Chief 1985
Executive Officer of the Company
Roy E. Ledbetter............. 69 President and Chief Executive Officer of 1984
Highland Industrial Park, Inc., A Subsidiary of
Highland Resources, Inc., principally engaged
in Industrial Development
Michael F. Mahony(5)......... 54 Partner of Mahony & Yocum, Attorneys at Law 1981
Richard H. Mason............. 61 President of Gibraltar Energy Company, 1983
principally engaged in Oil and Gas Exploration
and Production
Jack W. McNutt............... 64 Retired Director, President and Chief Executive 1990
Officer of Murphy Oil Corporation,
principally engaged in Oil and Gas
Exploration and Production
George F. Middlebrook, III... 48 General Partner of Middlebrook Mineral 1997
Partnership LLP, principally engaged in
management of Oil and Gas Properties
R. Madison Murphy(3)......... 41 Chairman of the Board of Murphy Oil 1989
Corporation, principally engaged in Oil and Gas
Exploration and Production, Director of
Deltic Timber Corporation
Robert C. Nolan(3)........... 57 Chairman of the Board of Deltic Timber 1982
Corporation, Managing Partner of Munoco
Company, principally engaged in Oil and Gas
Exploration and Production
Cal Partee, Jr.(2)........... 54 Partner of Partee Flooring Mill, Oil and Timber 1983
Investments, principally engaged in Oil and
Lumber Production
Carolyn Tennyson............. 47 Timber Investments 1997
John D. Trimble, Jr. ........ 67 Managing Partner of Trimble Properties, 1983
principally engaged in Oil and Other
Investments
</TABLE>
- ---------------
NOTES:
(1) All nominees are current directors of the Company. All current directors
were elected at the last annual meeting on May 26, 1998.
(2) E. Larry Burrow is the brother-in-law of Cal Partee, Jr.
(3) Claiborne P. Deming, R. Madison Murphy and Robert C. Nolan are first cousins
of each other.
(4) Al Graves, Jr. is the son of Albert Graves who is a director of The Citizens
National Bank of Hope, Hope, Arkansas ("CNB"), which was acquired by the
Company on March 30, 1998, and the brother of John Robert Graves who is a
director and chief executive officer of CNB and is the South Arkansas
Regional Chairman of the Company.
3
<PAGE> 7
(5) Michael F. Mahony is the brother of Emon A. Mahony, Jr. who is a director of
The City National Bank, Ft. Smith, Arkansas.
DIRECTOR NOMINATION AND QUALIFICATION
The Board of Directors has a standing Nominating Committee. Names of all
proposed nominees for election at the next annual meeting of Stockholders are
referred to the Nominating Committee for its consideration. The Nominating
Committee makes such inquiry into the qualification of proposed nominees as it
deems appropriate and annually reports its findings to the Board of Directors
concerning the qualifications of proposed nominees and submits its recommended
slate of nominees. In making such recommendations, the Nominating Committee does
not discriminate based upon the sex, race or religion of any proposed nominee.
If approved by the Board of Directors, the Nominating Committee's recommended
slate of nominees becomes the Board of Directors' recommended slate of nominees.
It is the policy of the Nominating Committee to consider nominees recommended by
Stockholders. The procedure to be followed by any stockholder who desires to
recommend a nominee for consideration by the Nominating Committee is the same as
that procedure disclosed under the caption "Stockholders Proposals" on page 23
of this Proxy Statement.
MEETINGS AND COMMITTEES OF THE BOARD
During fiscal year 1998, the Company's Board of Directors held twelve (12)
meetings. With the exception of Directors Claiborne P. Deming and Cal Partee,
Jr., each incumbent director attended 75% or more of the meetings of the Board
held during the periods in which they served as members of the Company's Board
of Directors.
EXECUTIVE COMMITTEE. The Board of Directors has a standing Executive
Committee which is authorized to exercise all authority of the Board of
Directors in the intervals between the meetings of the Board of Directors with
respect to the business affairs of the Company. The members of the Executive
Committee are Directors James V. Kelley, Roy E. Ledbetter, Robert C. Nolan, Cal
Partee, Jr. and John D. Trimble, Jr. During fiscal year 1998, the Executive
Committee met fourteen (14) times. Each member attended 75% or more of the
meetings.
COMPENSATION, ESOP AND BENEFITS COMMITTEE. The Board of Directors has a
standing Compensation, ESOP and Benefits Committee which formulates policies and
procedures with respect to compensation and benefits. The members of the
Compensation, ESOP and Benefits Committee are Directors Claiborne P. Deming, Roy
E. Ledbetter, Richard H. Mason and Robert C. Nolan. The functions of this
Committee are (1) to review, approve and recommend to the Board salaries of all
officers of the Company and of its wholly-owned banking subsidiaries; (2) to
review, approve and recommend to the Board annually the aggregate amount to be
expended as annual bonuses to executive officers of the Company and its
wholly-owned banking subsidiaries; and (3) to review, oversee and approve the
employee benefit plans of the Company. During fiscal year 1998, the Committee
met two (2) times. Each member of the committee attended 75% or more of the
meetings except Claiborne P. Deming and Richard H. Mason.
AUDIT COMMITTEE. The Board of Directors has a standing Audit Committee
which oversees the internal and external audit functions. The members of the
Audit Committee are Directors E. Larry Burrow, Michael F. Mahony, Tommy Hillman,
R. Madison Murphy, and John D. Trimble, Jr. The functions of the Audit Committee
are (1) to review and examine the internal control, compliance and accounting
operating systems of the Company and its subsidiary banks; (2) to recommend to
the Board any changes in policy deemed necessary as a result of this review; and
(3) to recommend to the Board and Stockholders the appointment of the Company's
external audit firm. During fiscal year 1998, the Committee met three (3) times.
Each member attended 75% or more of the meetings.
NOMINATING COMMITTEE. The Board of Directors has a standing Nominating
Committee, the sole function of which is to nominate candidates to the Board of
Directors. The members of the Nominating Committee are Directors E. Larry
Burrow, Jack W. McNutt, Carolyn Tennyson, and John D. Trimble, Jr. During fiscal
year 1998, the Nominating Committee met one (1) time. The meeting was attended
by all members of the committee.
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<PAGE> 8
COMPENSATION OF DIRECTORS
All members of the Board of Directors of the Company other than executive
officers are paid a retainer of $300 per month in addition to a fee of $480 per
meeting for all regular and special meetings of the Board which they attend.
Members of the Board serving on Board committees are paid a fee of $100 for each
committee meeting they attend and committee chairmen receive an additional $50
for each meeting they attend.
Directors receive no other cash or cash-equivalent forms of remuneration
solely in their capacities as directors of the Company or its subsidiaries.
Officers of the Company and its subsidiaries who also serve on the Company's
Board are not paid a fee for serving in the capacity of director. The total cost
to the Company for such fees during 1998 was $125,520.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's executive officers, directors and persons who own more than
ten percent (10%) of the Company's Common Stock must file reports of ownership
and changes of ownership in the Company with the Securities and Exchange
Commission and the National Association of Securities Dealers pursuant to
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange Act").
Additionally, Item 405 of Regulation S-K under the Act requires the Company to
identify in its proxy statement those individuals for whom one of the above
referenced reports was not filed on a timely basis during the most recent fiscal
year or prior fiscal years. Except as described below, to the Company's
knowledge, based exclusively on a review of the copies of the reports provided
to the Company and on information and written representations provided to the
Company by individual executive officers and directors, the Company believes
during fiscal year 1998, all filing requirements applicable to executive
officers and directors have been made in compliance with Section 16(a) and the
rules promulgated thereunder. John E. Burns, the former Secretary and Chief
Financial Officer, filed a late Form 4 reporting a stock option exercise and one
sale transaction. Jim Harwood timely filed a Form 5 reflecting a delinquent
reporting of a purchase transaction that should have been reported on Form 4 and
the granting of stock options that should have been reported on a Form 5 for a
previous year. George F. Middlebrook, III filed a timely Form 5 reflecting
delinquent reporting of four sale transactions that should have been reported on
Form 4. John Robert Graves inadvertently filed a late report Form 5 for the year
ended 1998.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, certified public
accountants, to serve as the Company's independent auditors for the fiscal year
ending December 31, 1999, and the Board of Directors has directed that such
appointment be submitted to the Stockholders at the Meeting for their
ratification and approval thereof. The Company has been advised by Arthur
Andersen LLP that neither it nor any of its partners or associates has any
relationship with the Company other than the usual relationship that exists
between independent public accountants and clients. If the foregoing appointment
is rejected by the Stockholders, the Board of Directors will appoint an
independent auditor to serve for the fiscal year ending December 31, 1999, whose
appointment to serve for any period subsequent to the 2000 Annual Meeting shall
be subject to Stockholders' approval at such Annual Meeting.
Representatives of Arthur Andersen LLP will be present at the Meeting, will
have an opportunity to make a statement to the Stockholders, if desired, and
will be available to respond to appropriate questions from Stockholders.
In connection with its audit of the books and accounts of the Company for
the fiscal year ended December 31, 1998, Arthur Andersen LLP examined the
Company's annual consolidated financial statements, performed a review of its
consolidated annual and quarterly filings with the Securities Exchange
Commission, and consulted with the Company concerning other accounting and
certain tax matters.
THE BOARD OF DIRECTORS RECOMMENDS THE RATIFICATION AND APPROVAL OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS.
5
<PAGE> 9
PROPOSAL TO ADOPT THE FIRST UNITED BANCSHARES, INC.
EMPLOYEES' LONG-TERM INCENTIVE PLAN
PROPOSAL
The 1994 Equity Participation Plan was adopted by the Board of Directors on
March 21, 1994, and approved by the Company's shareholders at the 1994 annual
meeting (the "1994 Plan"). The 1994 Plan will be replaced by the 1999 Employees'
Long-Term Incentive Plan (the "1999 Plan"), which was recently adopted by the
Board of Directors, subject to shareholder approval.
The 1999 Plan is intended to (1) ensure that the 1994 Plan complies with
certain provisions of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (2) permit the exercise or vesting of
a grant or award to be contingent upon the attainment of performance goals and
objectives, (3) increase the number of shares of the Company's $1.00 par value
voting Common Stock (the "Common Stock") that may be granted or awarded under
the 1999 Plan, and (4) add performance and phantom shares as types of awards
that may be granted to officers and other employees of the company and its
subsidiaries.
All shares reserved for grant or issuance under the 1994 Plan have been
granted or issued. Accordingly, upon the approval of the 1999 Plan, the 1994
Plan will be terminated, except that any outstanding grants and awards will
remain exercisable in accordance with their terms. No grants or awards have been
made under the 1999 Plan, and the amount of any such grant or award and any
terms and conditions thereof are not currently determinable.
Shareholder approval of the 1999 Plan is required to satisfy the listing
requirements of the NASDAQ National Market and the limitations on plan amendment
set forth in the 1994 Plan. The following summary of the 1999 Plan is qualified
in its entirety by reference to the full text of the plan, which is attached as
Addendum A hereto.
ADMINISTRATION
The Board of Directors possesses the plenary authority to administer the
plan, including the authority to designate employees to whom grants and awards
will be made, make grants and awards, to determine the specific terms and
conditions of each grant and award, and to interpret and construe the terms of
the plan and any related document or form. Decisions, interpretations, and
actions of the Board of Directors are final and conclusive on the Company, its
subsidiaries, shareholders, employees and beneficiaries.
Alternatively, the Board of Directors may delegate all or a portion of its
administrative power and authority to a committee of not less than two members
of the board. The members of this committee must be "nonemployee directors"
within the meaning of Rule 16b-3 promulgated under the Exchange Act.
The 1999 Plan provides indemnification for the members of the Board of
Directors in connection with the administration of the plan, including any
employee assisting the members of the board.
SHARES SUBJECT TO THE 1999 PLAN
The 1999 Plan increases the number of shares of Common Stock that may be
granted or awarded thereunder. A maximum of four percent (4%) of the outstanding
shares of Common Stock, determined from time to time (1,011,771 shares as of
March 15, 1999), may be issued under the plan, subject to specified adjustment
for changes in the capitalization of the Company. Shares may be authorized and
unissued shares, treasury shares or shares acquired on the open market or by
private purchase.
ELIGIBILITY
Employees of the Company and its subsidiaries, including, but not limited
to, all executive and senior officers, are eligible to receive grants or awards
under the 1999 Plan, when designated by the Board of
6
<PAGE> 10
Directors. As of March 15, 1999, there were approximately 1,000 full-time
equivalent employees eligible to participate in the 1999 Plan.
FAIR MARKET VALUE
The term "fair market value" is defined in the 1999 Plan as the mean of the
closing bid and ask prices of Common Stock as quoted on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") on the date of grant
or award, or if no Common Stock is traded on such date, fair market value is
determined as of the date Common Stock last traded on such system. Otherwise,
the Board of Directors may determine the fair market value of Common Stock using
any reasonable valuation method. As of March 15, 1999, the closing bid and ask
prices of Common Stock were $16.0625 and $16.375, respectively.
TYPES OF GRANTS AND AWARDS
The 1999 Plan provides for the following types of grants and awards:
options (nonqualified or nonstatutory and incentive or qualified options),
restricted stock, performance shares, phantom shares, and stock appreciation
rights. Each of these types of grants and awards is described below.
Options. The Board of Directors may, in its discretion, grant nonqualified
or incentive stock options to employees. The Board of Directors determines the
exercise price of any such option, the number of shares of Common Stock subject
to the option, and the time or times at which the option is exercisable. The
board determines the term of any option granted under the 1999 Plan and whether
the exercise of any option will be subject to the attainment of performance
goals and objectives. The board may grant dividend equivalents in connection
with any option granted under the plan.
Payment of the option price may be in cash or an equivalent or in the form
of shares of Common Stock; provided, however, that the Board of Directors may
impose limitations with respect to the tender of Common Stock in consideration
of the option price.
Options which are designated by the Board of Directors as incentive stock
options must comply with the additional requirements of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Among other things, the
option price may not be less than the fair market value of Common Stock at the
time of grant and the aggregate fair market value (determined at the time of
grant) of the Common Stock with respect to which incentive stock options may be
exercised by any employee during a calendar year may not exceed $100,000.
Restricted Stock. The 1999 Plan permits the Board of Directors to grant or
make available for purchase shares of restricted stock. The purchase price, if
any, for such stock is determined by the Board of Directors and may be less than
the fair market value of Common Stock as of the date of grant. At the time a
grant of restricted stock is made, the board will designate a restriction period
during which the transfer or other disposition of the shares is prohibited. The
Board of Directors, in its discretion, may impose additional conditions with
respect to the lapse of the restriction period, such as the attainment of
specified performance goals or other vesting requirements.
Subject to any restrictions or limitations imposed by the Board of
Directors, employees who receive a grant of restricted stock will generally have
all rights and privileges of shareholders, including full voting rights and the
right to receive dividend equivalents, during the restriction period.
Certificates for shares of Common Stock relating to an award of restricted stock
will be delivered to an employee upon the expiration or termination of the
restriction period and the satisfaction of any additional terms and conditions
applicable to such grant.
Performance Shares. The 1999 Plan permits the Board of Directors to grant
or make available for purchase performance shares. The purchase price for such
shares, if any, is determined by the Board of Directors and may be less than the
fair market value of Common Stock as of the date of grant. Performance shares
granted or made available for purchase are subject to performance goals
determined by the Board of Directors. Such goals may relate to the Company, a
subsidiary, a division, department or unit of the Company
7
<PAGE> 11
or a subsidiary or to any employee, group of employees or combination thereof.
The Board of Directors may award dividend equivalent payments with respect to
performance shares granted under the 1999 Plan.
Upon the attainment of applicable performance goals and the satisfaction of
any additional terms and conditions, an employee will (1) be paid the number of
shares of Common Stock equal to the performance shares earned, (2) be afforded
the right to purchase shares of Common Stock at a price designated by the Board
of Directors, which may be less than fair market value, (3) be paid in cash in
an amount equal to the fair market value of the number of shares of Common Stock
represented by the performance shares earned, or (4) receive a combination
thereof, determined in the discretion of the board. If the applicable
performance goals are not satisfied, in whole or in part, due to circumstances
that are beyond the control of the Company or the employee, the Board of
Directors may provide for full or partial payment of the award or for its
cancellation, without payment. Prior to the issuance of Common Stock in
consideration of performance shares, an employee shall have no rights as a
shareholder of the Company.
Phantom Shares. The Board of Directors may grant or make available for
purchase phantom shares, the value of which is related to the value of shares of
Common Stock. The purchase price for such shares, if any, will be determined by
the board and may be less than the fair market value of Common Stock as of the
date of grant. No Common Stock is issuable in respect of the grant or purchase
of phantom shares, and the Company is not required to establish a fund or set
aside assets for the payment of such shares. Each phantom share is credited to a
phantom share account, which account is established solely for bookkeeping
purposes. An amount equal to dividends paid on shares of Common Stock is
credited to such account based upon the number of phantom shares credited to
such account. The Board of Directors will prescribe conditions for the
incremental payment of amounts distributable in respect of phantom shares, such
as the establishment of vesting periods. Amounts distributable in respect of
phantom shares may be paid in the form of cash, Common Stock or a combination
thereof, determined in the discretion of the Board of Directors. Employees are
not entitled to the rights of a shareholder of the Company prior to the issuance
of shares of Common Stock in respect of phantom shares.
Stock Appreciation Rights. To encourage the acquisition and retention of
Common Stock by providing a form of grant or award payable in cash which will
allow employees to exercise options without the necessity of selling shares to
pay the option price or resulting taxes, the 1999 Plan includes stock
appreciation rights. The Board of Directors may grant Stock Appreciation Rights
("SAR") either concurrently with an option or separately, without regard to any
option. The Board of Directors determines the term of each SAR and the time or
times at which each SAR will be exercisable; provided, that no SAR may be
exercisable later than 10 years after the date of grant.
Upon the exercise of a SAR, the Company will deliver to the employee shares
of Common Stock or cash or a combination thereof in amount equal to the excess
of the current fair market value of Common Stock over (1) the option price, if
the SAR is related to an option, or (2) the fair market value of a share of
Common Stock on the date of grant, if the SAR is granted without regard to any
option.
CODE SECTION 162(m) LIMITATIONS
Code Section 162(m) generally disallows a tax deduction to public
corporations for annual compensation in excess of $1,000,000 paid to the
Company's chief executive officer and four other most highly compensated
executive officers. The section provides that the value of qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. The Company has reviewed this provision and
believes that it is not likely to be affected by the limitation. Accordingly,
grants and awards under the 1999 Plan are not intended to comply with the
performance-based requirements of Code Section 162(m).
ACCELERATION OF GRANTS AND AWARDS UPON CHANGE IN CONTROL
The vesting of grants and awards is accelerated, restrictions and other
conditions are deemed satisfied, and grants and awards are immediately
exercisable or transferable upon the occurrence of a change in control. A
"change in control" is generally deemed to occur upon (1) the acquisition by any
person or group of persons of more than 50% of the voting power of the Company's
(or a subsidiary's) securities, without approval or
8
<PAGE> 12
recommendation of the Board of Directors, or (2) a change in the composition of
the Board of Directors, which excludes a majority of the "continuing board" (as
defined in the 1999 Plan).
AMENDMENTS TO THE 1999 PLAN
The Board of Directors may amend or discontinue the 1999 Plan at any time,
without the approval or consent of shareholders, provided that no such amendment
or discontinuance may materially change or impair, without the prior consent of
the recipient thereof, an award or grant previously made under the plan.
TRANSFER OF GRANTS AND AWARDS
Grants and awards under the 1999 Plan are generally not subject to
transfer, assignment, pledge, alienation or other form of encumbrance, except in
the event of an employee's death; provided that the Board of Directors, in its
discretion, may permit the transfer of any nonqualified option, restricted
stock, performance share or unit or SAR to a member of the employee's immediate
family or to a trust or partnership established for such family members. As a
condition precedent to any such transfer, the employee and any transferee will
be required to enter into an agreement with the Board of Directors pursuant to
which the employee agrees to satisfy his applicable income and employment tax
obligations and the transferee agrees to be bound by such terms and conditions
as the Board of Directors deems necessary or appropriate.
EFFECTIVE DATE AND TERM
The 1999 Plan will be effective upon its approval by the shareholders of
the Company and shall remain in existence until all grants or awards thereunder
have been satisfied by the issuance of shares of Common Stock or the payment of
cash in respect thereto or earlier termination and all restrictions and
limitations imposed on shares of Common Stock have lapsed or such shares have
been forfeited; provided, however, that no grant or award shall be made after
the 10th anniversary of the date on which the 1999 Plan is approved by the
shareholders of the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following summary is based on current interpretations of existing
federal income tax laws and does not purport to be complete. Reference should be
made to the Code and additional state and local income tax consequences may
apply to transactions involving grants or awards under the 1999 Plan.
Options. There are no immediate federal income tax consequences to either
an employee or to the Company on the grant of a nonqualified option. Upon the
exercise of such an option, the employee recognizes ordinary income equal to the
difference between the aggregate option price of the shares of Common Stock with
respect to which the option is exercised and the aggregate fair market value of
such shares as of the exercise date, and the Company is entitled to a deduction
in the year of exercise in an amount equal to the amount the employee is
required to recognize as ordinary income.
An employee does not recognize ordinary income upon the grant or exercise
of an incentive stock option, but the excess of the fair market value of the
shares at the time of exercise over the option price is a tax preference item
which may subject the employee to the alternative minimum tax imposed under Code
Section 55. Upon the subsequent disposition of shares of Common Stock acquired
on the exercise of an incentive stock option, an employee will recognize capital
gain or loss in an amount equal to the difference between the exercise price and
the sales price of the Common Stock, provided that the shares are not disposed
of within two years of the date of grant and one year from the date of exercise
of the incentive stock option (the "required holding period"). An employee
disposing of shares prior to the expiration of the required holding period will
recognize ordinary income equal to the difference between the option price and
the fair market value of such shares on the option exercise date. The Company is
not entitled to a deduction in connection with the exercise of an incentive
stock option, unless the employee disposes of the shares acquired on the
exercise of the option prior to the expiration of the required holding period.
9
<PAGE> 13
If the exercise price of an option is paid by the surrender of
previously-owned shares, the basis of the previously-owned shares carries over
to the shares received on the exercise of the option. If the option is a
nonqualified option, any income recognized on exercise is added to the
employee's basis. If the option is an incentive stock option, the employee will
recognize gain if the shares surrendered were acquired through the exercise of
an incentive stock option and have not been held for the required holding
period. This gain will be added to the basis of the shares received on the
exercise of the option.
Restricted Stock and Performance Shares. There are no immediate federal
income tax consequences to either the employee or the Company upon the grant or
purchase by the employee of restricted stock or performance shares. Upon the
lapse of restrictions on the transfer or attainment of performance goals with
respect to restricted stock or performance shares, an employee will recognize
ordinary income in an amount equal to the difference between the purchase price,
if any, for the shares and the fair market value of Common Stock and cash
received with respect to such lapse or attainment, and the Company is entitled
to a deduction in the year of lapse or attainment in an amount equal to the
amount the employee is required to recognize as ordinary income. Dividends paid
on restricted stock are taxable to the employee as ordinary income and
deductible by the Company.
Under Code Section 83(b), an employee may elect within 30 days of the grant
or purchase of restricted stock to recognize taxable income in the year shares
are awarded in an amount equal to the difference between the fair market value
of the restricted stock at the time of grant or purchase and the purchase price,
if any, determined without regard to any restrictions, and the Company is
entitled to a corresponding deduction at that time. Any gain or loss on a
subsequent disposition of the stock by the employee is a capital gain or loss,
and no further deduction will be available to the Company. If an employee makes
this election and the employee subsequently forfeits the restricted stock, the
employee is not entitled to a deduction as a consequence of such forfeiture, but
the Company must include as ordinary income the amount it previously deducted in
the year of grant with respect to such shares.
Phantom Shares. There are generally no federal income tax consequences to
either the employee or the Company on the grant or purchase by the employee of
phantom shares or the crediting of dividend equivalents to a phantom share
account. An employee recognizes ordinary income upon the maturity of phantom
shares and dividend equivalents, if any, and the Company is entitled to a
deduction in the year of maturity in an amount equal to the amount the employee
is required to recognize as ordinary income. If phantom shares are purchased by
an employee, the employee is deemed to have a basis in the Common Stock issued
in respect of such shares equal to the purchase price.
Stock Appreciation Rights. The grant of an SAR generally does not result in
income to an employee or in a deduction for the Company. Upon the exercise of an
SAR, an employee will recognize ordinary income and the Company will be entitled
to a corresponding deduction in an amount equal to the fair market value of the
Common Stock and any cash received by the employee.
Withholding. If permitted under the terms of a specific grant or award, an
employee may elect to have the Company withhold from shares the employee would
otherwise be entitled to receive in connection with the receipt of Common Stock
or the lapse of restrictions on shares of restricted stock, shares of Common
Stock having a fair market value equal to the amount required to be withheld
under applicable income and employment tax laws.
Change in Control. Acceleration of the vesting or the lapse of restrictions
applicable to an award upon the occurrence of a change in control may result in
the characterization of the excess of the fair market value of Common Stock and
any cash paid with respect to such award over the purchase price, if any, as a
parachute payment (within the meaning of Code Section 280G) if the sum of such
amounts and any other such contingent payments received by the employee on
account of the change in control exceeds an amount equal to three times the
"base amount" of such employee. The term "base amount" generally means the
average of the annual compensation of such employee for the five years preceding
such change in ownership or control. An excess parachute payment is the excess
of the aggregate parachute payments made to such employee over such employee's
base amount. If the amounts received by an employee are characterized as
parachute
10
<PAGE> 14
payments, such employee will be subject to a 20% excise tax on any excess
parachute payment, and the Company will be denied any deduction with respect to
such payment.
VOTE REQUIRED
Adoption of the 1999 Plan requires the affirmative vote, cast in person or
by proxy, of the holders of at least a majority of the shares of Common Stock of
the Company represented and entitled to vote at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE 1999
EMPLOYEES' LONG-TERM INCENTIVE PLAN.
EXECUTIVE COMPENSATION AND CERTAIN SECURITY HOLDERS
REPORT OF THE COMPENSATION, ESOP AND BENEFITS COMMITTEE
In order to enhance disclosure of the Company's policy toward executive
compensation and to comply with the rules of the Securities and Exchange
Commission, the Compensation, ESOP and Benefits Committee ("Committee"), in
their capacity as such Committee, submits the following report addressing the
Company's policy toward executive compensation as it relates to the named
executive officers for fiscal year 1998.
Compensation Policy
The executive compensation policy of the Company is to compensate
executives in a manner where a reasonable relationship exists between the
maximization of corporate earnings and executive pay. The Company's compensation
program creates an incentive to improve overall performance relative to other
financial institutions within the Company's peer group. However, the Company
does not seek to provide executives with incentives to take undue risk and
thereby impair the Company's financial strength. The goal of the Company's
policy is to retain and motivate key employees with bonuses based upon
individual bank performance and initiatives as well as the Company's
performance. The Company's performance is primarily measured by internal goals
and performance levels compared to industry peers. If the Company achieves or
exceeds internal goals and industry performance levels, executive compensation
normally will be higher than in years where such goals and levels are not
achieved. In order to attract and retain highly qualified executives the Company
maintains an Employee Stock Ownership Plan and an Equity Participation Plan
which ensures that such executives will have a long-term stake in the success of
the Company.
Measures of Performance
The Committee measures the Company's performance by examining earnings per
share, return on assets and the level of nonperforming loans and assets. A
further analysis is done by comparing these factors with the Company's internal
goals, prior year's performance and peer group averages. The Company's revenues
in fiscal year 1998 were derived almost exclusively from the commercial banking
industry. Therefore, the Company measured its performance against a peer
industry average index comparing itself and its banks to commercial banks which
most closely resemble the Company's banks in asset size.
Executive Compensation
The Company's executive compensation program for fiscal year 1998 consisted
of (1) annual base salary, adjusted from fiscal year 1997, (2) executive bonus
based on the performance measures described above, (3) contributions to the
Company's Employee Stock Ownership Plan and (4) contributions to whole life
insurance policies for selected executives. The Committee feels that the above
named types of compensation provide an effective incentive for executives.
The Company's management was focused in their pursuit of maximizing
earnings and maintaining a low level of non-performing assets which resulted in
a significantly better 1998 performance. Notwithstanding the
11
<PAGE> 15
performance-based criterion noted in the preceding paragraph, various other
factors are considered in determining the appropriate level of executive
compensation. Other factors may include cost of living adjustments, as well as
the individual's past performance and potential with the Company.
The Committee has awarded executive compensation based upon the Company's
performance and believes that this correlation results in an enhanced synergy
between corporate goals and the interests of shareholders. As performance goals
are met or exceeded, resulting in increased value to shareholders, executives
are rewarded commensurately. The Committee believes that the level of executive
compensation in fiscal year 1998 is reflective of the foregoing compensation
policy and performance goals of the company.
Compensation of Chief Executive Officer
The Company paid Mr. Kelley a base salary of $286,000 in 1998. Mr. Kelley's
salary is considered appropriate by the Committee based upon his years of
experience in this position. Additionally, the Committee considered Mr. Kelley's
salary to be competitive when compared to other financial institutions within
the Company's peer group.
Mr. Kelley was awarded an annual bonus of $80,000 for 1998. The Committee
considered the 17.65% increase in earnings per share, the 12.64% return on
average equity and the 1.26% return on average assets sufficient to merit the
granting of his bonus.
Respectfully Submitted,
Compensation, ESOP and Benefits
Committee
/s/ ROBERT C. NOLAN
------------------------------------
Robert C. Nolan, Chairman
/s/ ROY E. LEDBETTER
------------------------------------
Roy E. Ledbetter
/s/ RICHARD H. MASON
------------------------------------
Richard H. Mason
/s/ CLAIBORNE P. DEMING
------------------------------------
Claiborne P. Deming
12
<PAGE> 16
STOCK PERFORMANCE
The following graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1993, as amended, or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts. The graph
compares the yearly percentage change in the cumulative total stockholder return
on the Company's Common Stock during the five fiscal years ended December 31,
1998 with the cumulative total returns on the S&P 500 Index and the Dow Jones
Regional Bank Index. The comparison assumes $100 was invested on December 31,
1993, in the Company's Common Stock and in each of the foregoing indices with
reinvestment of the dividends.
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
Banks,
Measurement Period First United Southern S&P
(Fiscal Year Covered) Bancshares U.S. Composite
<S> <C> <C> <C>
1993 100 100 100
1994 105.07 101.26 101.32
1995 147.50 147.42 139.40
1996 179.93 199.77 171.41
1997 233.49 311.99 228.59
1998 201.58 339.08 293.92
1997
1998
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First United Bancshares..................... 100 105.07 147.50 179.93 233.49 201.58
Banks, Southern U.S. ....................... 100 101.26 147.42 199.77 311.99 339.08
S&P Companies............................... 100 101.32 139.40 171.41 228.59 293.92
</TABLE>
COMPENSATION OF MANAGEMENT
The Company does not directly compensate the officers and management for
serving in that capacity. Compensation is provided by The First National Bank of
El Dorado, El Dorado, Arkansas ("El Dorado"), First National Bank of Magnolia,
Magnolia, Arkansas ("Magnolia"), Merchants and Planters Bank, N.A., Camden,
Arkansas ("Camden"), City National Bank of Fort Smith, Ft. Smith, Arkansas ("Ft.
Smith"), Commercial Bank at Alma, Alma, Arkansas ("Alma"), First United Bank,
Stuttgart, Arkansas ("Stuttgart"), The Bank of North Arkansas, Melbourne,
Arkansas ("Melbourne"), FirstBank, Texarkana, Texas ("Texarkana"), Fredonia
State Bank, Nacogdoches, Texas ("Nacogdoches"), City Bank & Trust of Shreveport,
Shreveport, Louisiana ("Shreveport"), Citizens National Bank of Hope, Hope,
Arkansas ("Hope"), Peoples Bank & Loan Company, Lewisville, Arkansas
("Lewisville"), First Republic Bank, Rayville, Louisiana ("Rayville"), and First
United Trust Company, N.A., El Dorado, Arkansas ("Trust Company"), the
wholly-owned subsidiaries of the Company. However, the Company does reimburse
each such wholly-owned or controlled banking subsidiary for the Company's
officer remuneration, which amount of reimbursement is set by the Company's
Board of Directors. The Company does compensate its directors for serving in
that capacity as previously discussed. The following table shows information
concerning the annual
13
<PAGE> 17
and long-term compensation for services in all capacities paid by the Company,
and its subsidiaries, during the fiscal years ended December 31, 1998, 1997, and
1996 of those persons where on December 31, 1998 (1) the chief executive officer
and (2) the other four most highly compensated executive officers of the Company
at the end of 1998. (The chief executive officer and the other four most highly
compensated executive officers are referred to collectively as the "Named
Executive Officers.") Mr. Jones became acting chief financial officer and
principal accounting officer upon Mr. John E. Burns termination of employment
and resignation as Secretary of the Company on July 28, 1998. Messrs. Harwood,
Graves and Lewis were named as regional chairmen of the Company on April 1,
1998. All shares and per share amounts in the following charts have been
adjusted to reflect the 2-for-1 stock split of the Company's Common Stock on
June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
----------------------------------- COMPENSATION
FISCAL OTHER RESTRICTED -------------
YEAR ANNUAL STOCK SECURITIES ALL OTHER
ENDED COMPENSATION AWARD(S) UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION DEC. 31 SALARY($) BONUS($) (1)(2)($) ($) OPTIONS(#)(3) ($)(4)(5)
- --------------------------- ------- --------- -------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
James V. Kelley.......... 1998 286,000 80,000 3,979 40,500(6) 20,000(7) 8,000
Chairman, President, 1997 260,000 105,000 4,037 24,886 13,206 8,981
Chief Executive Officer and 1996 225,000 95,000 4,037 594,588 53,206 9,000
Director of the Company
Robert L. Jones.......... 1998 154,000 24,500 1,675 -- 5,000(7) 8,000
Assistant Secretary, Acting 1997 149,350 29,000 1,843 -- -- 8,981
Chief Financial Officer 1996 143,600 27,500 2,010 -- -- 7,781
and Principal Accounting
Officer of the Company;
President and Chief
Executive Officer of
Magnolia
Jim N. Harwood........... 1998 180,000 40,000 1,922 -- 14,000(7) 8,000
North and West Arkansas 1997 170,000 50,000 2,081 -- -- 8,981
Regional Chairman of the 1996 160,000 40,000 2,160 -- 10,000 9,000
Company; President, Chief
Executive Officer and
Director of Ft. Smith
John Robert Graves....... 1998 170,000 40,000 1,360 -- 14,000(7) 4,267
South Arkansas Regional
Chairman of the Company;
Chief Executive Officer and
Director of Hope
Gordon Lewis............. 1998 175,000 40,000 2,040 -- 14,000(7) 8,000
Texas and Louisiana
Regional Chairman of the
Company; Chairman,
President and Director of
Nacogdoches
</TABLE>
- ---------------
NOTES:
(1) El Dorado provides a whole life insurance policy for the benefit of Mr.
Kelley. For the year ended December 31, 1998 the amounts paid by El Dorado
for the policy for Mr. Kelley was $3,403. Group life insurance is provided
to Company employees, including the named executive officers. The costs
associated with the whole life insurance policy for Mr. Kelley and the group
life insurance costs are included within the Other Annual Compensation
Column.
14
<PAGE> 18
(2) Amounts representing certain personal benefits are not included in this
table. The Company and its subsidiaries have a policy of providing country
club services and automobiles to certain officers. The key employees of
these benefits are selected by the respective subsidiaries' Boards of
Directors. In the Company's estimation, the dollar amount of such items for
the personal benefit of each named individual does not exceed ten percent
(10%) of the aggregate compensation for any individual.
(3) Represents the number of shares of Company Common Stock underlying
non-statutory stock options granted for the years 1996, 1997 and 1998. No
stock appreciation rights were granted to the executives named in the
Summary Compensation Schedule.
(4) The Company contributed cash contributions to an employee stock ownership
plan ("ESOP") during fiscal year 1998 which is included as All Other
Compensation. The Company makes cash contributions to the ESOP for the
purchase of the Company's Common Stock for the benefit of covered employees.
All employees over 20 and one-half years of age who have six months service
with the Company and work 1,000 hours or more per year are covered by the
ESOP. Contributions to the ESOP are discretionary. The Board of Directors
determines the contribution each year up to a maximum of 15% of covered
compensation. Each covered employee is allocated the same percentage of
covered compensation. For the year ended December 31, 1998, the amount of
the Company's contribution allocated to the accounts of Messrs. Kelley,
Jones, Harwood, Graves, and Lewis were, respectively $8,000, $8,000, $8,000,
$4,267, and $8,000. This compensation is included within the All Other
Compensation column.
(5) Contributions for officers to the Company's pension plan are not included in
the above table since they cannot readily be individually calculated by the
regular actuaries for the plan. However, current compensation covered by the
plan does not differ by more than ten percent (10%) from the covered
compensation set forth in the annual compensation columns of the Summary
Compensation Table for any named executive officer. Covered compensation
covers basic compensation and bonuses or incentive compensation paid to all
plan participants. The following table sets forth the annual life annuity,
payable under the qualified pension plan to participating employees in the
specified remuneration and years of service classification. The benefits
provided by the pension plan are computed on a straight life annuity basis
and are subject to a deduction for social security benefits.
PENSION PLAN TABLE
SCHEDULE OF ESTIMATED ANNUAL RETIREMENT BENEFITS
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE -----------------------------------------------
COMPENSATION 10 15 20 25 30
------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$ 20,000................................. $ 2,400 $ 3,600 $ 4,800 $ 6,000 $ 7,200
$ 30,000................................. $ 3,930 $ 5,859 $ 7,860 $ 9,825 $11,789
$ 50,000................................. $ 7,719 $11,579 $15,438 $19,298 $23,157
$ 80,000................................. $13,705 $20,588 $27,410 $34,263 $41,115
$100,000................................. $17,705 $26,558 $35,410 $44,263 $53,115
$150,000................................. $27,705 $41,558 $55,410 $69,263 $83,115
</TABLE>
The final average compensation is averaged over the highest three (3)
consecutive years of employment. Benefits commence at age 65, the normal
retirement date, and continue for the lifetime of the participant, with 120
payments guaranteed. The estimated credited years of service for Mr.
Kelley, Mr. Jones, Mr. Harwood, Mr. Graves, and Mr. Lewis are 14, 15, 10,
1, and 1, respectively. Messrs. Jones and Harwood are eligible for
supplemental retirement benefits pursuant to the terms of Supplemental
Executive Retirement Agreements which they have entered into with the
Company. The terms and conditions of such agreements are generally
described under Executive Agreements on page 21 of this Proxy Statement.
(6) On January 20, 1998, a restricted stock option for 2,000 shares of the
Company's Common Stock was granted to the indicated executive officer. The
closing market price of the Company's unrestricted Common Stock on the date
of the grant was $20.25 resulting in a dollar value of $40,500. Shares of
the
15
<PAGE> 19
Company's Common Stock subject to the restricted option may be acquired at
no cost by the executive officer. Restricted options vest cumulatively over
a four year period, beginning one year following the date of the grant.
Vesting occurs 100% four years after the date of the grant.
(7) On January 20, 1998, a non-statutory stock option of the Company's Common
Stock was granted to the indicated executive officer. Such grant was made at
$20.25 per share. Non-statutory options vest cumulatively over a four (4)
year period, beginning one year following the date of the grant. Vesting
occurs twenty-five percent (25%) per year up to one hundred percent (100%)
vesting four (4) years after the date of the grant.
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
At the close of business on March 25, 1999 the record date for the Meeting,
the Company had issued and outstanding 25,294,296 shares of $1.00 par Value,
Common Stock. Listed in the following table are those Stockholders known to the
Company's management, as of March 25, 1999, who own beneficially 5% or more of
the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
TITLE OF CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- -------------- ------------------------------------ ---------- ----------------
<S> <C> <C> <C>
Common Stock, Par Warren A. Stephens Trust; the W.R. Stephens, 2,391,038(1) 9.45%
Value $1.00 Jr. Revocable Trust; the W.R. Stephens, Jr.
Trust; the Bess C. Stephens Trust(2); the
Elizabeth Ann Stephens Campbell Revocable
Trust; Craig Campbell Revocable Trust; Jackson
T. Stephens; and Stephens Group, Inc.
111 Center Street, Suite 2400
Little Rock, Arkansas 72201
</TABLE>
- ---------------
NOTE:
(1) All shares, except as described below, were held in trust and administered
by the Bank of New York until December 30, 1996 when the trust terminated
and the shares were distributed to the beneficial owners. The trust was
created and the shares deposited therein upon the consummation of the merger
by and between the Company and InvestArk Bankshares, Inc. on June 14, 1994.
The Bess C. Stephens Trust beneficially owns a total of 1,043,864 shares or
5.08% of the Company's Common Stock, which total includes 673,652 shares
that were not part of the trust administered by the Bank of New York.
Additionally, the W. R. Stephens, Jr. Trust beneficially owns 5,400 shares
of the Company's Common Stock and the Craig Campbell Revocable Trust
beneficiary owns 2,000 shares of the Company's Common Stock which were not
part of the trust. The Company expresses no opinion as to whether the
beneficial owners constitute a "group" as defined in Section 13(d)(3) of the
Exchange Act.
(2) The Bess C. Stephens Trust is the successor in interest to the ownership of
the Company's Common Stock previously held by the W. R. Stephens Trust which
was liquidated on February 6, 1996.
16
<PAGE> 20
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the nature and extent of ownership of the
Common Stock of the Company by its directors, nominees for election and
directors, each of the Named Executive Officers named in the Summary
Compensation Table and all of the company's directors and executive officers as
a group as of February 1, 1999.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME OF BENEFICIAL OWNER OWNERSHIP(1) CLASS
- ------------------------ ------------ -------
<S> <C> <C>
E. Larry Burrow(2).......................................... 60,234 *
Claiborne P. Deming(3)...................................... 428,290 1.69%
Al Graves, Jr.(4)........................................... 123,675 *
John Robert Graves(5)(16)................................... 287,428 1.14%
Jim N. Harwood(6)(16)....................................... 21,241 *
Tommy Hillman(7)............................................ 130,868 *
Robert L. Jones(8)(16)...................................... 14,980 *
James V. Kelley(9)(16)...................................... 88,171 *
Roy E. Ledbetter(10)........................................ 30,950 *
Gordon Lewis(11)(16)........................................ 44,041 *
Michael F. Mahony(12)....................................... 58,402 *
Richard H. Mason............................................ 3,162 *
Jack W. McNutt.............................................. 24,000 *
George F. Middlebrook, III (13)............................. 152,747 *
R. Madison Murphy(14)....................................... 176,600 *
Robert C. Nolan(15)......................................... 597,021 2.36%
Cal Partee, Jr.............................................. 39,546 *
Carolyn Tennyson............................................ 1,600 *
John D. Trimble, Jr......................................... 89,916 *
All Directors, Nominees for Director and Executive Officers
as a Group (19 Persons)................................... 2,372,872 9.38%
</TABLE>
- ---------------
* Percentage of shares of Common Stock held is less than one percent (1%) of
the issued and outstanding shares of Common Stock of the Company.
NOTES:
(1) All shares listed represent Common Stock held in the company and are owned
of record with beneficial ownership thereof except as described in certain
of the following notes.
(2) Share totals exclude 385,218 shares owned of record by First Land &
Investment Company. Mr. Burrow is a director and stockholder of First Land &
Investment Company along with seven other directors. Mr. Burrow expressly
disclaims beneficial ownership of such shares.
(3) Claiborne P. Deming owned of record 299,322 shares; 128,968 shares were held
by Mr. Deming as sole trustee of trusts for the benefit of his children who
all live in his household and in which he disclaims any beneficial interest.
(4) Al Graves, Jr. owned of record 72,908. Mr. Graves and his spouse owned of
record 24,596 shares; Mr. Graves' spouse and stepdaughter owned of record
5,826 shares, beneficial interest in such shares is expressly disclaimed by
Mr. Graves. In addition, Mr. Graves beneficially owned 17,518 shares by
virtue of his proportionate partnership interest in the Graves Family
Partnership and beneficially owns 2,827 shares by virtue of his
proportionate partnership interest in the Graves Family Limited Partnership.
(5) John Robert Graves owned of record 163,014 shares; 22 shares were owned of
record by the Company's Employee Stock Ownership Plan in which Mr. Graves
had a beneficial interest. Mr. Graves' spouse owned of record 89,242 shares
and beneficially owned an additional 756 shares held in an IRA,
17
<PAGE> 21
beneficial interest in such shares is expressly disclaimed by Mr. Graves;
10,549 shares were held by Mr. Graves as either a trustee or custodian for
the benefit of minors, beneficial interest in such shares is expressly
disclaimed by Mr. Graves. In addition, Mr. Graves beneficially owned 17,518
shares by virtue of his proportionate partnership interest in the Graves
Family Partnership and beneficially owned 2,827 shares by virtue of his
proportionate partnership interest in the Graves Family Limited
Partnership.
(6) Jim N. Harwood and his wife owned of record 6,522 shares; 6,219 shares were
owned of record by the Company's Employee Stock Ownership Plan in which
such shares Mr. Harwood had a beneficial interest.
(7) Tommy Hillman owned of record 87,358 shares; Mr. Hillman and his wife owned
of record 19,742 shares; Tommy Hillman Farms which is owned by Mr. Hillman
owned of record 14,352 shares; Mr. Hillman's spouse owned of record 160
shares; a total of 9,256 shares were owned of record by Mr. Hillman's
self-directed IRA. Mr. Hillman's two (2) adult sons each own 1,280 shares
in which Mr. Hillman expressly disclaims beneficial interest in such
shares.
(8) Robert L. Jones owned of record 600 shares; 13,130 shares were owned of
record by the Company's Employee Stock Option Plan in which Mr. Jones had a
beneficial interest.
(9) James V. Kelley owned of record 600 shares; 17,732 shares were owned of
record by the Company's Employee Stock Ownership Plan in which Mr. Kelley
had a beneficial interest.
(10) Share total excludes 100,548 shares owned of record by Highland Industrial
Park, Inc. Roy E. Ledbetter, who is an officer of Highland Industrial Park,
Inc., expressly disclaims beneficial interest in such shares.
(11) Gordon Lewis and his spouse owned of record 40,500 shares; 41 shares were
owned by the Company's Employee Stock Ownership Plan in which Mr. Lewis has
a beneficial interest. A total of 4,500 shares were owned by the adult
children of Mr. Lewis in which Mr. Lewis expressly disclaims beneficial
interest.
(12) Michael F. Mahony owned of record 48,994 shares and Mr. Mahony beneficially
owned an additional 6,408 shares held in an IRA; 3,000 shares were owned of
record by Mr. Mahony's spouse, beneficial interest in such shares is
expressly disclaimed by Mr. Mahony.
(13) George Middlebrook, III and his spouse owned of record 99,632 shares; Mr.
Middlebrook's spouse owned of record 9,623 shares; 13,372 shares were owned
of record by Mr. Middlebrook as custodian for his minor son; 30,120 shares
were owned of record by Mr. Middlebrook as custodian for his minor nephews.
(14) R. Madison Murphy owned of record 107,590 shares. A total of 19,574 shares
were held by R. Madison Murphy as trustee of trusts for the benefit of
minor children; 2,070 shares were held by Mr. Murphy as trustee of trusts
for the benefit of his minor nieces and nephews; 6,614 shares were held by
others as trustees of trusts for the benefit of Mr. Murphy's minor
children; 8,654 shares are owned of record by Mr. Murphy's spouse;
beneficial interest in all such shares owned by Mr. Murphy is expressly
disclaimed by Mr. Murphy. Mr. Murphy beneficially owns 29,198 shares by
virtue of residuary interests in trusts of which he is not a trustee.
Additionally, Mr. Murphy has a beneficial interest in 2,900 shares by
virtue of his proportionate interest as a member of a limited liability
company which is the general corporate partner of a limited partnership
owning Company stock.
(15) Robert C. Nolan owned of record 175,327 shares; 2,477 shares were owned of
record by Mr. Nolan's spouse; Mr. Nolan as Trustee (with shared voting and
investment power) controlled 419,217 shares; 46,788 shares are owned by Mr.
Nolan's adult children and his minor grandsons and granddaughter,
beneficial interest in which is expressly disclaimed by Mr. Nolan.
18
<PAGE> 22
(16) Share totals include shares issuable upon the exercise of options within a
period of sixty (60) days from March 25, 1999, as follows: Mr. John Robert
Graves -- 3,500 shares; Mr. Harwood -- 8,500 shares; Mr. Jones -- 1,250
shares; Mr. Kelley -- 69,839 shares; and Mr. Lewis -- 3,500 shares.
OPTION GRANTS IN 1998
The following table shows information concerning stock options granted
during 1998, as noted in the Summary Compensation Table, to the Company's Named
Executive Officers, which includes hypothetical realizable values for those
options (assuming they were exercised at the end of the ten year term) and the
hypothetical gain to all holders of Common Stock at the end of that ten year
period, in each case assuming the Common Stock had achieved accumulative
appreciation of 5% and 10% per year. None of the below described options were
eligible to be exercised during 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING GRANTED
OPTIONS TO EXERCISE MARKET
GRANTED EMPLOYEES PRICE PRICE EXPIRATION
NAME (#)(2) IN 1998 ($/SHARE) ($/SHARE) DATE
- ---- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
James V. Kelley.......... 2,000(4) 2.1% -- 20.25 01/20/2008
20,000(5) 20.6% 20.25 20.25 01/20/2008
Robert L. Jones.......... 5,000(5) 5.2% 20.25 20.25 01/20/2008
Jim N. Harwood........... 14,000(5) 14.4% 20.25 20.25 01/20/2008
John Robert Graves....... 14,000(5) 14.4% 20.25 20.25 01/20/2008
Gordon Lewis............. 14,000(5) 14.4% 20.25 20.25 01/20/2008
Dollar Gains of All First
United
Stockholders(1)........
<CAPTION>
POTENTIAL REALIZABLE VALUES
AT ASSUMED ANNUAL RATES
OF STOCK APPRECIATION
FOR OPTION TERM (3)
------------------------------------------
0% 5% 10%
DOLLAR GAINS DOLLAR GAINS DOLLAR GAINS
NAME ($) ($) ($)
- ---- ------------ ------------ ------------
<S> <C> <C> <C>
James V. Kelley.......... 40,500 65,890 105,040
-- 254,800 645,400
Robert L. Jones.......... -- 63,700 161,350
Jim N. Harwood........... -- 178,360 451,780
John Robert Graves....... -- 178,360 451,780
Gordon Lewis............. -- 178,360 451,780
Dollar Gains of All First
United
Stockholders(1)........ $322,249,331 $816,246,932
</TABLE>
- ---------------
(1) Total dollar gains are based on the indicated assumed annual rates of
appreciation and calculated on the 25,294,296 shares of Common Stock
outstanding as of December 31, 1998.
(2) There were no SARs granted to the Chief Executive Officer or any other
executive officer in 1998.
(3) The potential realizable values represent future opportunity and have not
been reduced to present value in 1998 dollars. The dollar amounts included
in these columns are the result of calculations at assumed rates set by the
SEC for illustration purposes, and these rates are not intended to be a
forecast of the common stock price and are not necessarily indicative of the
values that may be realized by the named executive officer. The potential
realizable values are based on arbitrarily assumed annualized rates of stock
price appreciation of five percent and ten percent over the full 10-year
term of the options. For example, in order for the individuals named above
who received options with an exercise price of $20.25 per share to realize
the potential values set forth in the five percent and ten percent columns
in the table above, the price per share of First United Common Stock would
have to be approximately $32.99 and $52.52 respectively.
(4) In 1998, the Company granted Mr. Kelley, with regard to services for the
Company, a restricted stock option to purchase a total of 2,000 shares of
the Company's Common Stock at no cost. Such options shall not be exercisable
prior to the date five years, or after the date ten years, from the date
such option was granted.
(5) On January 20, 1998, the Company granted to each of the Named Executive
Officers, with regard to services for the Company, a non-statutory stock
option to purchase the shares of the Company's Common Stock at an exercise
price of $20.25 per share.
19
<PAGE> 23
OPTION EXERCISES IN 1998 AND 1998 YEAR-END VALUES
The following table shows information concerning stock option exercises in
1998 and the year-end value of unexercised options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT 1998 YEAR-END AT 1998 YEAR-END
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE($)
- ---- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
James V. Kelley.......... -0- -0- 54,778 / 87,984 331,205 / 713,825
Robert L. Jones.......... -0- -0- 0 / 5,000 0 / 0
Jim Harwood.............. -0- -0- 5,000 / 19,000 22,550 / 22,550
John Robert Graves....... -0- -0- 0 / 14,000 0 / 0
Gordon Lewis............. -0- -0- 0 / 14,000 0 / 0
</TABLE>
EXECUTIVE AGREEMENTS
The Company has entered into Executive Severance Agreements with certain of
its officers including James V. Kelley, Jim N. Harwood and John Robert Graves.
The agreements continue through July 26, 2001, and provide that they are
automatically extended in twelve (12) month increments unless the Company gives
prior written notice of termination. These agreements provide for termination
compensation in the event their employment terminates under certain conditions,
as set forth in the agreements. In the event of a covered termination, the
executive shall be entitled to receive a multiple of base period income equal to
his annual base salary, plus the greater of the average of any incentive bonus
payable to the executive for the Company's last two fiscal years or the
executive's target bonus opportunity under the Company's annual incentive plan.
The base period income multiple for Messrs. Kelley, Harwood and Graves is 3.00,
2.00, and 2.00, respectively. Termination compensation will be paid in cash or
common stock of the Company at the election of the executive. If an executive is
entitled to receive termination compensation, the Company would also be
obligated to provide the same or substantially similar insurance coverages for a
specified period for the executive and his beneficiaries in effect at the time
of termination or, at the option of the executive, to include in the executive's
termination compensation a lump sum amount equal to the value of such benefits.
The specified period for Messrs. Kelley, Harwood and Graves is thirty-six
months, twenty-four months, and twenty-four months, respectively. In addition,
if any excise tax is imposed under Section 4999 of the Internal Revenue Code, as
amended, on payments received, the Company will pay the executive a sum that
will net him the amount he would have received if the excise tax had not been
imposed.
The Company has entered into Supplemental Executive Retirement Agreements
with certain key employees including Robert L. Jones and Jim N. Harwood. The
agreements are non-qualified, unfunded arrangements which provide additional
retirement benefits to certain key employees to replace all or a portion of the
executive's retirement benefits which were reduced when the Company amended its
defined benefit plan to comply with provisions of the Internal Revenue Code, as
amended. Under the agreements, the Company will pay the executives a Deferred
Compensation Benefit provided the executive remains employed with the Company
until normal retirement date or in the event of a Change of Control, as defined
in the agreements. In the event of early retirement with approval of the
Company's Board of Directors, the executive will receive a reduced portion of
his Deferred Compensation Benefit. The executive will only be entitled to
receive his Vested Accrued Benefit, as defined in the agreements, in the event
of early retirement without Board approval. If the executive dies prior to the
earlier of his normal retirement date or termination of employment, no benefits
will be payable pursuant to the agreements. The Deferred Compensation Benefits
of Messrs. Jones and Harwood are, respectively, $28,740 and $21,756 annually and
are payable over a 10-year period in 120 equal monthly installments.
Nacogdoches has entered into an Employment Agreement with Gordon Lewis. The
agreement is automatically extended each day and in effect has a continuing two
year term. The Agreement may be terminated by either party on thirty days notice
or by Nacogdoches upon the employee's death or becoming disabled. If Nacogdoches
terminates the agreement with Cause, as defined in the agreement, or if Mr.
Lewis terminates the agreement without Good Reason-Change in Control, as defined
in the agreement, the
20
<PAGE> 24
agreement shall terminate without further obligation to Mr. Lewis other than
obligations owing or accrued to, vested in, or earned by Mr. Lewis through the
date of termination ("Accrued Obligations"). If Mr. Lewis terminates the
agreement with Good Reason-Change in Control, or if Nacogdoches terminates the
agreement without Cause before or after the occurrence of a Change in Control,
as defined in the agreement, Nacogdoches shall be obligated to pay Mr. Lewis in
cash one lump sum within thirty days after the date of determination of the
aggregate of all Accrued Obligations plus an amount equal to two (2) times Mr.
Lewis' annual salary in effect at the time of such termination.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company and its subsidiaries have had, and expect to have in the
future, banking transactions in the ordinary course of business with officers
and directors of the Company and El Dorado, Magnolia, Camden, Ft. Smith, Alma,
Stuttgart, Texarkana, Melbourne, Nacogdoches, Shreveport, Hope, Lewisville,
Rayville, and the Trust Company; directors of the Company and El Dorado,
Magnolia, Camden, Ft. Smith, Alma, Stuttgart, Texarkana, Nacogdoches, Melbourne,
Shreveport, Hope, Lewisville, Rayville and the Trust Company; associates of such
persons and principal Stockholders. Loans made to this group, including
companies in which they are principal owners (10% or more ownership interest)
amounted to approximately $31,853,000 as of December 31, 1998, which represents
12.46% of the Company's equity capital. Such transactions have been made in the
ordinary course of business on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the same time for
comparable transactions with others not affiliated with the Company, and did not
involve more than the normal risk of collectibility or present other unfavorable
features.
Michael F. Mahony is a partner in the law firm of Mahony & Yocum, El
Dorado, Arkansas. The Company retained such law firm as counsel for El Dorado
during fiscal year 1998. Such firm received legal fees from El Dorado based upon
an hourly basis at rates comparable to those prevailing in the market.
First Land & Timber Corporation ("FLT"), of which Robert G. Dudley, the
former Secretary of the Company, served as President and director and Michael F.
Mahony and Robert C. Nolan also served as directors until June, 1998, leased
certain real property to El Dorado on an annual basis composed of the parking
lot at the main bank location of El Dorado and ground leases on real property
occupied by the east and west motor bank branch locations of El Dorado. In June
of 1998, El Dorado purchased said property from FLT for $285,000.
During 1998, Arkansas Oklahoma Gas Co. had a line of credit from Ft. Smith
in the principal amount of $6,000,000 at a variable rate of interest which is
calculated as National Prime Rate minus 0.75% (interest adjusted and paid
quarterly). The largest amount of indebtedness in 1998 was $4,400,000 and as of
December 31, 1998, the outstanding indebtedness was $3,700,000. The W. R.
Stephens, Jr. Trust and Elizabeth Ann Stephens Campbell Revocable Trust each own
33 1/3% of the shares of A.O.G. Corporation, which is a 100% owner of Arkansas
Oklahoma Gas Co. See footnote 1 on page 13 of this Proxy Statement.
El Dorado, Magnolia, Camden, Ft. Smith, Stuttgart, Texarkana, Melbourne,
Hope and the Trust Company maintained brokerage accounts with Stephens Inc. in
1998 in which the total commissions earned by Stephens Inc. was $241,551. The
Company's Defined Benefit Plan and Trust maintained an account with Stephens
Capital Management ("SCM"), the investment advisor division of Stephens Inc.,
during 1998 in which earnings by SCM totaled $106,864. Stephens Inc. is a
subsidiary of Stephens Group, Inc. See footnote 1 on page 16 of this Proxy
Statement.
ANNUAL REPORT
The Annual Report to Stockholders for the fiscal year ended December 31,
1998, including financial statements and other matters of interest to
Stockholders accompanies this Proxy Statement or has been previously mailed to
you. Stockholders are referred to such Report for financial information about
the activities of the Company, but such report is not incorporated into this
Proxy Statement and is not to be deemed a part of the proxy soliciting material.
21
<PAGE> 25
THE COMPANY WILL PROVIDE, WITHOUT CHARGE, TO ANY PERSON RECEIVING A COPY OF
THIS PROXY STATEMENT, UPON ORAL OR WRITTEN REQUEST, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998, INCLUDING THE
FINANCIAL STATEMENTS AND SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH A REQUEST SHOULD BE ADDRESSED TO JOHN
G. COPELAND, CHIEF FINANCIAL OFFICER, FIRST UNITED BANCSHARES, INC., MAIN AND
WASHINGTON STREETS, EL DORADO, ARKANSAS 71730, TELEPHONE (870) 863-3181.
OTHER MATTERS
So far as is now known to the management of the Company, there is no
business other than that described herein to be presented to the Stockholders
for action at the Meeting. Should other business properly come before the
Meeting, votes may be cast pursuant to proxies with respect to any such business
in the best judgment of the person acting under the proxies.
STOCKHOLDER PROPOSALS
The 2000 Annual Meeting of Stockholders is presently scheduled to be held
May 23, 2000. Any stockholder of the Company who wishes to have a proposal
presented in the Company's Proxy Statement for such Meeting must deliver such
proposal in writing in accordance with Rule 14a-8 promulgated under the Exchange
Act, addressed to Mr. John G. Copeland, to the Company at its office at Main and
Washington Streets, El Dorado, Arkansas 71730, not later than December 31, 1999.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING ARE URGED TO SIGN,
DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED ADDRESSED
ENVELOPE WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
of
FIRST UNITED BANCSHARES, INC.
/s/ JAMES V. KELLEY
------------------------------------
James V. Kelley
Chairman of the Board, President and
Chief Executive Officer
22
<PAGE> 26
ADDENDUM A
FIRST UNITED BANCSHARES, INC.
1999 EMPLOYEES' LONG-TERM INCENTIVE PLAN
<PAGE> 27
FIRST UNITED BANCSHARES, INC.
1999 EMPLOYEES' LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 -- PURPOSE........................................
SECTION 2 -- DEFINITIONS....................................
SECTION 3 -- ADMINISTRATION.................................
Composition...............................................
Power and Authority.......................................
Hold Harmless.............................................
SECTION 4 -- ELIGIBILITY....................................
SECTION 5 -- SHARES SUBJECT TO THE PLAN AND MAXIMUM
AWARDS....................................................
Number of Shares..........................................
Type of Common Stock......................................
Cancellation..............................................
SECTION 6 -- STOCK OPTIONS..................................
Special Definition........................................
General Provisions........................................
Incentive Stock Options...................................
Performance Goals.........................................
Vesting...................................................
Dividend Equivalents......................................
Manner of Exercise........................................
Rights as Stockholder.....................................
SECTION 7 -- RESTRICTED STOCK...............................
Special Definition........................................
General Provisions........................................
Performance Goals.........................................
Vesting...................................................
Enforcement of Restrictions...............................
Lapse of Restrictions.....................................
Shareholder Rights........................................
SECTION 8 -- PERFORMANCE SHARES.............................
Special Definition........................................
General Provisions........................................
Satisfaction Performance Objectives.......................
Not a Stockholder.........................................
No Adjustments............................................
Dividend Equivalent Payments..............................
SECTION 9 -- PHANTOM SHARES.................................
Special Definition........................................
Grants....................................................
Phantom Share Account.....................................
Distribution from Phantom Share Account...................
Not a Stockholder.........................................
SECTION 10 -- STOCK APPRECIATION RIGHTS.....................
Special Definition........................................
General Provisions........................................
Manner of Exercise........................................
Payment...................................................
</TABLE>
i
<PAGE> 28
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 11 -- GENERAL.......................................
Adoption and Effective Date...............................
Duration..................................................
Transferability of Incentives.............................
Effect of Termination of Employment.......................
Additional Legal Requirements.............................
Adjustment................................................
Written Agreements........................................
Withholding...............................................
No Continued Employment...................................
Amendment and Termination of the Plan.....................
Immediate Acceleration of Incentives......................
Governing Law.............................................
Other Benefits............................................
Deferral..................................................
</TABLE>
ii
<PAGE> 29
FIRST UNITED BANCSHARES, INC.
1999 EMPLOYEES' LONG-TERM INCENTIVE PLAN
First United Bancshares, Inc., a corporation organized and existing under
the laws of the State of Arkansas (the "Corporation"), hereby establishes the
1999 Employees' Long-Term Incentive Plan (the "Plan"). This Plan is intended to
replace the First United Bancshares, Inc. 1994 Equity Participation Plan, except
that outstanding grants and awards made under such predecessor plan shall remain
in effect until exercised or expired in accordance with their terms.
SECTION 1
PURPOSE
This Plan is established to optimize the profitability and growth of the
Corporation through the use of compensation incentives that link the financial
interests of executives and other key employees with the interests of the
Corporation and its shareholders. This Plan is further intended to provide
flexibility to the Corporation in connection with its compensation practices and
policies and to attract, retain and motivate officers, executives and other key
employees through the grant of nonqualified stock options, incentive options,
restricted stock, phantom and performance shares, and stock appreciation rights,
all as more fully set forth below.
SECTION 2
DEFINITIONS
2.1 "Act" means the Securities Exchange Act of 1934, as amended, including
any rule, regulation or interpretation promulgated thereunder.
2.2 "Board of Directors" or "Board" means the Board of Directors of the
Corporation.
2.3 "Change in Control" means and shall be deemed to occur if:
a. Any "person," including any "group," determined in accordance with
Section 13(d)(3) of the Act, other than a qualified employee benefit plan
maintained by the Corporation or a Subsidiary, is or becomes the beneficial
owner, directly or indirectly, of Common Stock of the Corporation or a
Subsidiary representing more than 50% of the combined voting power of the
Corporation's or Subsidiary's then outstanding securities, other than as a
result of an issuance of securities initiated by the Corporation or open
market purchases approved by the Board, as long as a majority of the Board
approving the purchases are directors at the time the purchases are made.
b. As a result of, or in connection with, any tender or exchange
offer, merger or other business combination, sale of assets or contested
election or any combination of the foregoing, a change in the members of
the Board of Directors of the Corporation occurs which results in the
exclusion of a majority of the "continuing board." For this purpose, the
term "continuing board" means the members of the Board of Directors
determined as of the effective date of this Plan and subsequent members of
such Board who are elected by or on the recommendation of a majority of
such "continuing board."
The Board of Directors shall, in good faith, determine whether a Change in
Control hereunder has occurred.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Common Stock" means $1.00 par value voting common stock issued by the
Corporation.
2.6 "Employee" means a common law employee of the Corporation and/or its
Subsidiaries, determined in accordance with the Corporation's standard personnel
policies and practices.
A-1
<PAGE> 30
2.7 "Fair Market Value" means the mean of the closing bid and asked prices
of Common Stock as quoted on the National Association of Securities Dealers
Automated Quotation System (NASDAQ) national market or other exchange on which
Common Stock is regularly traded on the date of the grant, the exercise of an
Incentive or the lapse of restrictions applicable to an Incentive granted
hereunder, as the case may be. If no Common Stock is traded on such date, then
Fair Market Value shall be the mean of the closing bid and asked prices on the
date Common Stock last traded on such system or exchange. If Common Stock is not
regularly traded, then Fair Market Value shall be determined by the Board of
Directors in good faith in accordance with generally accepted methods of
valuation.
2.8 "Incentive" means a right to purchase or receive shares of Common
Stock in accordance with the terms of this Plan. An Incentive may be granted in
the form of stock options, restricted stock, stock appreciation rights, phantom
or performance shares, or any combination thereof.
2.9 "Participant" means an Employee who is granted or awarded an Incentive
under this Plan.
2.10 "Plan" means this 1999 Employees' Long-Term Incentive Plan, as the
same may be amended from time to time.
2.11 "Subsidiary" means any corporation of which the Corporation owns,
directly or indirectly, more than 50% of the total combined voting power of all
classes of stock.
2.12 Other Definitions. The term "non-employee director" is defined in
Section 3.1 hereof; the terms "stock option" and "option" are defined in Section
6.1 hereof; the term "nonqualified stock option" is defined in Section 6.1
hereof; the term "incentive stock option" is defined in Section 6.1 hereof; the
term "restricted stock" is defined in Section 7.1 hereof; the term "performance
share" is defined in Section 8.1 hereof; the term "phantom share" is defined in
Section 9.1 hereof; the term "stock appreciation right" or "SAR" is defined in
Section 10.1 hereof; the term "Cause" is defined in Section 11.4 hereof; and the
term "Effective Date" is defined in Section 11.1 hereof.
SECTION 3
ADMINISTRATION
3.1 Composition. This Plan shall be administered by the Board of
Directors; provided, however, that the Board, in its discretion, may delegate
the administrative power and authority granted to it hereunder to a committee
appointed by the Board, which committee shall consist solely of "non-employee
directors" and be comprised of not less than two members. For this purpose, the
term "non-employee director" shall have the meaning ascribed to it in Rule 16b-3
promulgated under the Act or any successor thereto. In the event of any such
delegation, all references to the Board of Directors hereunder shall be deemed
to include such committee.
3.2 Power and Authority. The Board of Directors shall have the
discretionary power and authority to award Incentives under the Plan, including
determination of the terms and conditions thereof, to construe and interpret the
provisions of the Plan and any form or agreement related thereto, to establish
and adopt rules, regulations, and procedures relating to the Plan and to
interpret, apply and construe such rules, regulations and procedures, and to
make any other determination which it believes necessary or advisable for the
proper administration of the Plan.
Decisions, interpretations and actions of the Board of Directors concerning
matters related to the Plan shall be final and conclusive on the Corporation,
its Subsidiaries and stockholders and Participants and beneficiaries hereunder.
Determinations hereunder need not be uniform, and the Board may make
determinations selectively among the Participants who receive or are eligible to
receive Incentives, whether or not such Participants are similarly situated.
3.3 Hold Harmless. The Corporation shall indemnify and hold harmless the
members of the Board of Directors and the individuals, including Employees of
the Corporation or a Subsidiary, performing services on behalf of the Board of
Directors hereunder, against any liability, cost or expense arising as a result
of any claim
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asserted by any person or entity under the laws of any state or of the United
States with respect to any action or failure to act of such individuals taken in
connection with the Plan, except claims or liabilities arising on account of the
willful misconduct or bad faith of any such individual.
SECTION 4
ELIGIBILITY
Employees of the Corporation and its Subsidiaries shall be eligible to
receive Incentives under this Plan, when designated by the Board of Directors.
Employees may be designated for participation hereunder individually or by
groups or categories, in the discretion of the Board of Directors.
SECTION 5
SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
5.1 Number of Shares. Subject to adjustment as provided in Section 11.6
hereof, the number of shares of Common Stock which may be issued under the Plan
shall not exceed four percent (4%) of the total number of shares of Common Stock
which may be issued and outstanding, from time to time. Except as provided in
this Section 5, the number of shares available for grant, transfer or issuance
under the Plan shall be reduced by the number of shares actually granted,
transferred or issued hereunder.
5.2 Type of Common Stock. Common Stock issued in connection with the grant
or award of an Incentive hereunder may be authorized and unissued shares or
issued shares held as treasury shares or shares acquired on the open market or
through private purchase.
5.3 Cancellation. Shares of Common Stock covered by Incentives which are
not earned or which are canceled, forfeited, terminated, expired or otherwise
lapsed for any reason and options or stock appreciation rights which expire
unexercised, are canceled or forfeited or which are exchanged for other forms of
options or Incentives hereunder, shall again be available for grant as an
Incentive under the Plan, to the extent permitted under Rule 16b-3 promulgated
under the Act or any successor thereto.
SECTION 6
STOCK OPTIONS
6.1 Special Definition. The term "stock option" or "option" means a right
to purchase shares of Common Stock pursuant to an Incentive granted hereunder.
Stock options granted hereunder may be nonqualified stock options or incentive
stock options. A "nonqualified stock option" is an option which is designated as
nonqualified and is not intended to meet the requirements of Section 422 of the
Code; an "incentive stock option" is an option which is designated as such and
which is intended to comply with the requirements imposed under Section 422 of
the Code. All stock options shall comply with the provisions of Section 6.2
hereof, and incentive stock options shall comply with the provisions of Section
6.3 hereof.
6.2 General Provisions. All stock options granted under this Plan shall be
granted by the Board of Directors, in its discretion, subject to the following
general terms and conditions:
a. The number of shares of Common Stock subject to an option shall be
determined by the Board of Directors at the time of grant.
b. Except as provided in Section 6.3 hereof, the exercise price per
share shall be determined by the Board of Directors, in its discretion.
c. Subject to earlier termination as provided in Section 11.4 hereof,
the term of each stock option shall be determined by the Board of
Directors.
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d. The exercise of an option granted hereunder may be subject to such
performance goals and objectives as the Board of Directors deems
appropriate, in accordance with the provisions of Section 6.4 hereof.
e. Each stock option shall be exercisable at such time or times during
its term as may be determined by the Board of Directors, in accordance with
the provisions of Section 6.5 hereof; provided, however, that no option
shall be exercisable later than 10 years after its date of grant.
Stock options granted hereunder shall be evidenced by a written agreement
between the Board of Directors and each affected Participant. Any such agreement
shall identify the grant of the option as an incentive stock option or as a
nonqualified stock option.
6.3 Incentive Stock Options. In addition to the provisions of Section 6.2
hereof, each incentive stock option granted hereunder shall be subject to the
following:
a. The aggregate Fair Market Value (determined as of the time the
option is granted) of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by any
Participant during any calendar year (under all plans of the Corporation),
shall not exceed $100,000. If and to the extent Fair Market Value exceeds
$100,000, the affected portion of any incentive stock option shall be
treated as a nonstatutory stock option.
b. Incentive stock options must be granted within 10 years from the
date on which this Plan is adopted.
c. Unless sooner exercised, all incentive stock options shall expire
no later than 10 years after the date of grant.
d. Incentive stock options granted to a Participant hereunder shall be
exercisable during his or her lifetime only by such Participant.
e. No incentive stock option shall be granted to any Participant who
at the time such option is granted would own (within the meaning of Section
422 of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Corporation, determined in
accordance with Section 422(b)(6) of the Code, unless the exercise price of
such option is not less than 110% of the Fair Market Value of Common Stock
determined at the time of grant.
f. No incentive stock option shall be granted to any Participant who
is not an employee (within the meaning of Section 3401 of the Code) of the
Corporation or its Subsidiaries during the period described under Section
422(a)(2) of the Code.
g. Notwithstanding any provision of this Plan to the contrary, the
exercise price of an option granted hereunder shall not be less than Fair
Market Value at the date of grant.
Any certificate or agreement evidencing an incentive stock option granted under
the Plan shall contain such other provisions as the Board of Directors shall
deem advisable, but shall in all events be consistent with and contain all
provisions required in order to qualify the options as incentive stock options
under Section 422 of the Code.
6.4 Performance Goals. The Board of Directors, in its discretion, may
impose performance goals as a condition of exercise with respect to an option
granted hereunder. Such performance goals may relate to the Corporation, a
Subsidiary, a division, department or unit of the Corporation or a Subsidiary or
any Participant or Employee or group of Participants or Employees hereunder.
Such performance goals shall be achieved during the period designated by the
Board of Directors.
If the performance goals designated by the Board of Directors are achieved,
options granted to each affected Participant shall be exercisable at such times
as may be designated by the Board. In the event such objectives are not
satisfied due to circumstances that, in the determination of the Board of
Directors, are
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outside the control of the Corporation, a Subsidiary, or the Participant, the
Board, in its sole discretion, may provide for the exercise, in full, of the
option, a lesser exercise or the cancellation of the option.
6.5 Vesting. Unless otherwise provided in any agreement evidencing an
option granted hereunder, subject to any additional limitations imposed under
Section 6.4 hereof, and subject to earlier termination as provided in Section
11.4 hereof, any such option shall vest and be exercisable over a four-year
period, as follows:
a. 25% of the aggregate number of shares of Common Stock subject to
such option shall vest and be exercisable on the first anniversary date of
the grant of such option;
b. An additional 25% of the aggregate number of shares of Common Stock
subject to such option shall vest and be exercisable on the second
anniversary date of the grant of such option;
c. An additional 25% of the aggregate number of shares of Common Stock
subject to such option shall vest and be exercisable on the third
anniversary date of the grant of such option; and
d. An additional 25% of the aggregate number of shares of Common Stock
subject to such option shall vest and be exercisable on the fourth
anniversary date of the grant of such option.
To the extent not exercised, such installments shall cumulate and be exercisable
during the term of the affected option.
6.6 Dividend Equivalents. The Board of Directors, in its discretion, may
grant dividend equivalents in connection with an option granted hereunder.
Dividend equivalents may be granted in cash or in the form of Common Stock and
shall be subject to such additional terms and conditions as the Board of
Directors, in its sole discretion, deems appropriate.
6.7 Manner of Exercise. A stock option may be exercised, in whole or in
part, by providing written notice to the Board of Directors, specifying the
number of shares of Common Stock to be purchased and accompanied by the full
purchase price for such shares.
The option price shall be payable to the Corporation in the form of cash
(including cash equivalents) or, if permitted under the terms and conditions
applicable to a specific option grant, by delivery of previously acquired shares
of Common Stock held by the Participant, or in such other manner as may be
authorized, from time to time, by the Board of Directors. Common Stock tendered
to the Corporation in payment of the option price shall be valued at its Fair
Market Value as of the date of exercise.
A Participant or group of Participants may exercise stock options and
contemporaneously sell the shares of Common Stock acquired thereby pursuant to a
brokerage or similar arrangement, provided that the proceeds thereof are applied
to the payment of the purchase price of the shares. Any such transaction shall
be with the consent of the Board of Directors.
As soon as practicable after the receipt of written notification or
exercise and payment of the option price in full, the Board of Directors shall
cause the Corporation to deliver to the Participant, registered in the
Participant's name, certificates representing shares of Common Stock in the
appropriate amount.
6.8 Rights as Stockholder. Prior to the issuance of shares of Common Stock
upon the exercise of a stock option, a Participant shall have no rights as a
stockholder with respect to the shares subject to such option.
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SECTION 7
RESTRICTED STOCK
7.1 Special Definition. The term "restricted stock" means shares of Common
Stock which are sold or transferred by the Corporation to a Participant at a
price which may be below Fair Market Value, or for no payment, but subject to
restrictions on sale or other transfer by the Participant.
7.2 General Provisions. The Board of Directors may grant shares of
restricted stock, in its discretion, subject to the following terms and
conditions:
a. The number of shares to be transferred or sold by the Corporation
to a Participant as restricted stock shall be determined by the Board of
Directors.
b. The Board of Directors shall determine the price, if any, at which
shares of restricted stock shall be sold, which may vary from time to time
and which may be below the Fair Market Value of such shares as of the date
of sale.
c. All shares of restricted stock transferred or sold to a Participant
hereunder shall be subject to such terms, conditions and restrictions for
such period or periods as the Board of Directors, in its discretion, may
determine, subject to the provisions of Section 7.3 and 7.4 hereof
(including, without limitation, restrictions on transfer, forfeiture
provisions, and restrictions based upon the achievement of specified
performance goals and objectives), and subject to earlier forfeiture as
described in Section 11.4 hereof.
Each grant of restricted stock hereunder shall be evidenced by a written
agreement between the Board of Directors and each affected Participant.
7.3 Performance Goals. The Board of Directors, in its discretion, may
impose performance goals as a condition to the grant of restricted stock
hereunder. Such performance goals may relate to the Corporation, a Subsidiary, a
division, department or unit of the Corporation or a Subsidiary or any
Participant or Employee or group of Participants or Employees hereunder. Such
performance goals shall be achieved during the period designated by the Board of
Directors.
If the performance goals designated by the Board of Directors are achieved,
restricted stock granted hereunder shall be transferable by the affected
Participant in the manner designated by the Board. In the event such objectives
are not satisfied due to circumstances that, in the determination of the Board
of Directors, are outside the control of the Corporation, a Subsidiary, or the
Participant, the Board, in its sole discretion, may provide for the
transferability of a lesser number of shares of restricted stock or the
forfeiture of the restricted stock, in its entirety.
7.4 Vesting. Unless otherwise provided in any agreement evidencing the
grant of restricted stock hereunder, subject to any additional limitations
imposed in accordance with Section 7.3 hereof, and subject to early termination
as provided in Section 11.4 hereof, shares of restricted stock granted hereunder
shall vest and become transferable upon the fifth anniversary of the date of
grant hereunder.
7.5 Enforcement of Restrictions. In order to enforce any restrictions
imposed by the Board of Directors pursuant to Sections 7.3 or 7.4 hereof, a
Participant receiving a grant of restricted stock hereunder shall enter into an
agreement with the Corporation setting forth the conditions of the grant. Each
certificate issued with respect to restricted shares shall bear such legends as
the Board of Directors, in its sole discretion, shall deem necessary or
appropriate. The Board, in its discretion, may additionally require that shares
of restricted stock registered in the name of the Participant be deposited,
together with a stock power endorsed in blank, with the Corporation.
7.6 Lapse of Restrictions. At the end of any period during which the
shares of restricted stock are subject to forfeiture or restriction on transfer,
such restrictions shall lapse and a certificate representing the number of
shares of Common Stock with respect to which the restrictions have lapsed shall
be delivered to the Participant free of restriction, except as may be imposed by
applicable law or as provided herein.
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7.7 Shareholder Rights. Subject to any restrictions or limitations imposed
by the Board of Directors, each Participant receiving restricted stock hereunder
shall have the full voting rights of a stockholder with respect to such shares
during any period in which the shares are subject to forfeiture or restriction
on transfer. During any period of restriction hereunder, dividends paid in cash
or property with respect to the underlying shares of restricted stock shall be
paid to the Participant currently, accrued by the Corporation as a contingent
obligation or converted to additional shares of stock, in the discretion of the
Board of Directors.
SECTION 8
PERFORMANCE SHARES
8.1 Special Definition. The term "performance share" means the right to
receive or purchase (at a price which may be below Fair Market Value) Common
Stock upon the completion of certain performance objectives.
8.2 General Provisions. The Board of Directors may grant performance
shares, in its discretion, subject to the following terms and conditions:
a. The number of shares granted to a Participant shall be determined
by the Board of Directors.
b. Each performance share shall be subject to performance objectives
established by the Board of Directors. Performance objectives may relate to
the Corporation, a Subsidiary, a division, department or unit of the
Corporation or a Subsidiary or any Participant or group of Participants.
Such performance objectives shall be achieved during the period designated
by the Board of Directors.
c. All performance shares shall be subject to such additional
restrictions for such period or periods as the Board of Directors, in its
discretion, may determine, and shall be subject to early termination as
provided in Section 11.4 hereof.
d. The Board of Directors, in its discretion, may establish a purchase
price for the acquisition of shares of Common Stock upon the completion of
the performance objectives, if any, which price may be below Fair Market
Value.
Each grant of performance shares shall be evidenced by a written agreement
between the Board of Directors and each affected Participant.
8.3 Satisfaction Performance Objectives. If the performance objectives
designated by the Board of Directors are achieved, each affected Participant
shall be paid in the manner designated by the Board of Directors. Payment shall
be made in the form of (a) the number of shares of Common Stock equal to the
number of performance shares initially granted to that Participant, (b) the
right to purchase Common Stock at a price designated by the Board of Directors,
which price may be below Fair Market Value, (c) a cash payment of the Fair
Market Value of Common Stock in an amount equal to the number of performance
shares granted to the Participant, or (d) a combination thereof.
If such objectives are not satisfied due to circumstances that, in the
determination of the Board of Directors, are outside the control of the
Corporation or the Participant, the Board of Directors, in its discretion, may
provide for payment in full of the Incentive, lesser payment or cancellation.
8.4 Not a Stockholder. The award of performance shares shall not entitle a
Participant to exercise the rights of a stockholder of the Corporation with
respect to such shares, until the transfer of shares of Common Stock with
respect to such award.
8.5 No Adjustments. No adjustment shall be made in performance shares
awarded to account for cash dividends paid or other rights issued to the holders
of Common Stock prior to the end of any period with respect to which performance
objectives are applicable.
8.6 Dividend Equivalent Payments. The Board of Directors, in its
discretion, may award to a Participant granted performance shares hereunder
dividend equivalent payments or similar rights. If so granted, an adjustment
shall be made in the number of performance shares.
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SECTION 9
PHANTOM SHARES
9.1 Special Definition. The term "phantom share" means a bookkeeping entry
to the credit of a Participant which represents a share of Common Stock.
9.2 Grants. Phantom shares shall be granted in the discretion of the Board
of Directors, subject to the following terms and conditions.
a. The number of phantom shares granted to a Participant shall be
determined by the Board of Directors.
b. The price for such shares, if any, shall be determined by the Board
of Directors and may be less than the fair market value of Common Stock at
the time of grant.
c. Phantom shares shall be subject to such restrictions for such time
or times as the Board of Directors shall determine, including the early
termination provisions described in Section 11.4 hereof.
Grants of phantom shares shall be evidenced by a written agreement between the
Board of Directors and each affected Participant.
9.3 Phantom Share Account. Phantom shares granted to a Participant shall
be credited to a "phantom share account" established and maintained for such
Participant on the books and records of the Corporation or a Subsidiary thereof,
as the case may be. Such account shall be a bookkeeping entry only and shall not
require the Corporation or any Subsidiary to segregate or otherwise earmark
assets. No shares of Common Stock shall be issued or issuable at the time a
phantom share is credited to a Participant's phantom share account.
An amount equal to dividends payable with respect to Common Stock
represented by the credit of phantom shares to a Participant's phantom share
account shall be credited to such account. Any stock dividend, stock split or
other recapitalization shall be reflected in the credits made to a Participant's
phantom share account.
9.4 Distribution from Phantom Share Account. All phantom shares granted to
a Participant shall be distributable in accordance with the terms and conditions
imposed by the Board of Directors. When any such share is or becomes
distributable, the affected Participant shall be entitled to receive a
distribution from the Corporation in such form (which may include shares of
Common Stock, cash or a combination thereof) as the Board of Directors shall
determine.
9.5 Not a Stockholder. The credit of phantom shares to a Participant shall
not entitle such Participant to exercise the rights of a stockholder of the
Corporation, until the issuance of shares of Common Stock with respect to such
credit.
SECTION 10
STOCK APPRECIATION RIGHTS
10.1 Special Definition. The term "stock appreciation right" or "SAR"
means a right to receive, without payment, shares of Common Stock, cash or a
combination thereof, determined in accordance with the provisions of this
Section 10. Stock appreciation rights granted hereunder may relate to an option
granted under the Plan (whether an outstanding option or an option granted
contemporaneous with the SAR) or stock appreciation rights may be granted
separately, without regard to any other Incentive.
10.2 General Provisions. All stock appreciation rights shall be granted by
the Board of Directors, in its discretion, subject to the following general
terms and conditions:
a. Each SAR granted hereunder shall relate to the number of shares of
Common Stock determined by the Board of Directors. Unless otherwise
provided by the Board, if a SAR is granted in tandem with an option, the
number of shares of Common Stock to which the SAR relates shall be reduced
in the same
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proportion that the option related to the SAR is exercised or the option
shall be reduced in the same proportion that the SAR is exercised, as the
case may be.
b. Subject to earlier termination as provided in Section 11.4 hereof,
the term of each SAR shall be determined by the Board of Directors.
c. Each SAR granted hereunder shall be exercisable at such time or
times during its term as may be determined by the Board of Directors;
provided, however, that no SAR shall be exercisable later than 10 years
after the date of grant. Unless otherwise provided by the Board of
Directors, each SAR granted in tandem with an option shall be exercisable
at such times, to the extent and upon such terms and conditions as the
stock option to which it relates is exercisable.
Stock appreciation rights granted hereunder shall be evidenced by a written
agreement between the Board of Directors and each affected Participant.
10.3 Manner of Exercise. A SAR may be exercised, in whole or in part, by
giving written notice to the Corporation, specifying the number of SARs that the
holder thereof intends to exercise. The date that the Corporation receives such
written notice shall be referred to herein as the "exercise date." The
Corporation shall, promptly after the exercise date, deliver to the exercising
Participant certificates for shares of Common Stock or cash or a combination
thereof in an amount determined in accordance with Section 10.4 hereof;
provided, however, that any payment hereunder may be delayed for any period
necessary to comply with the requirements of the Act.
10.4 Payment. Subject to the right of the Board of Directors to deliver
cash in lieu of shares of Common Stock or for fractional shares, the number of
shares of Common Stock that shall be issuable upon the exercise of an SAR shall
be determined by dividing:
a. The number of shares of Common Stock as to which the SAR is
exercised, multiplied by the amount of the appreciation in such shares; by
b. The Fair Market Value of a share of Common Stock on the exercise
date.
For this purpose, "appreciation" shall be the amount by which the Fair Market
Value of the shares of Common Stock subject to the SAR on the exercise date
exceeds (a) in the case of a SAR related to a stock option, the option price of
the shares of Common Stock subject to the option, or (b) in the case of a SAR
granted alone, without reference to a related stock option, an amount equal to
the Fair Market Value of a share of Common Stock on the date of grant.
SECTION 11
GENERAL
11.1 Adoption and Effective Date. This Plan was adopted by the Board of
Directors on March 15, 1999 (its "Effective Date"), subject to its approval by
the affirmative vote of the holders of a majority of the Common Stock of the
Corporation present or represented at the immediately succeeding annual meeting
of its shareholders. Unless approved within one year after the date of the
Plan's adoption by the Board of Directors of the Corporation, the Plan shall not
be effective for any purpose. Prior to the approval of the Plan by the
shareholders of the Corporation, the Board of Directors may award Incentives
hereunder, but if such approval is not received in the specified period, such
awards shall be void and of no effect.
11.2 Duration. The Plan shall commence on its Effective Date and shall
remain in effect, subject to the right of the Board of Directors to amend or
terminate the Plan pursuant to Section 11.10 hereof, until all Incentives
granted under the Plan have been satisfied by the issuance of shares of Common
Stock or terminated and all restrictions imposed on shares of Common Stock in
connection with their issuance under the Plan have lapsed. No Incentive shall be
granted under the Plan after the 10th anniversary of the date on which the Plan
is approved by the Corporation's stockholders.
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11.3 Transferability of Incentives. Except as expressly provided in this
Section 11.3, no Incentive granted hereunder may be transferred, pledged,
assigned, hypothecated, alienated or otherwise encumbered or sold by the holder
thereof whether by operation of law or otherwise and whether voluntarily or
involuntarily (except in the event of the holder's death by will or the laws of
descent and distribution) and neither the Board of Directors nor the Corporation
shall be required to recognize any attempted assignment of such rights by any
Participant. During a Participant's lifetime, an Incentive may be exercised only
by the Participant or by the Participant's guardian or legal representative.
Notwithstanding the foregoing, the Board of Directors, in its sole
discretion, may provide that any nonqualified option, restricted stock,
performance share or unit or SAR awarded hereunder may be transferred by a
Participant to members of such Participant's immediate family, any trust for the
benefit of such family members, and/or partnerships whose partners are such
family members, but such transferees may not transfer such Incentives to third
parties. For purposes of this Section 11.3, the term "immediate family" shall
have the meaning ascribed to such term in Rule 16a-1(e) promulgated under the
Act.
Each transferee shall be subject to the terms and conditions applicable to
the Incentive prior to such transfer and, prior to any transfer hereunder, each
such transferee and the related Participant shall enter into a written agreement
with the Board of Directors acknowledging such terms and conditions, including,
but not limited to, the conditions with regard to the liability for payment of
any and all taxes, as well as any other restriction determined to be reasonably
necessary by the Board of Directors. To the extent the Board of Directors
determines that any transfer hereunder would result in the loss of the exemption
provided under Rule 16b-3 of the Act or a similar provision, such transfer shall
be deemed invalid.
11.4 Effect of Termination of Employment. In the event that a Participant
ceases to be an Employee of the Corporation or a Subsidiary on account of death,
disability, retirement or a voluntary or involuntary termination, other than for
Cause (as defined below), an Incentive granted hereunder shall be exercised or
expire at such times as may be expressly determined by the Board of Directors;
provided, however, that any extension of the exercise term by the Board of
Directors hereunder shall not exceed the original term of the Incentive. In the
absence of any such express determination, the following rules shall apply:
a. If any such termination occurs on account of retirement on or after
the date on which a Participant attains age 65 or on account of retirement
prior to such date with the consent of the Corporation, all restrictions on
all shares of restricted stock shall immediately lapse, all outstanding
options shall be immediately exercisable, and all other performance
objectives or other restrictions on Incentives granted under the Plan shall
be deemed to be satisfied or lapsed. All such Incentives shall be and
remain exercisable until the earlier of 24 months from the date of such
retirement or the expiration of the original term of the Incentive. For
purposes of this subsection a, the Board of Directors shall determine
whether a termination constitutes a retirement hereunder.
b. In the event any such termination is on account of disability (as
determined in the discretion of the Board of Directors), the provisions of
Section 11.4a shall apply, but such Incentives shall be and remain
exercisable during the 12-month period following the date of such
termination or the original term of the Incentive, if shorter.
c. In the event of a voluntary or involuntary termination, other than
for Cause (as defined below), the affected Participant shall be entitled to
exercise the vested and nonforfeitable portion of any Incentive granted
hereunder during the 120-day period following such termination or the
original term of any such Incentive, if shorter.
d. If a Participant hereunder dies while employed by the Corporation
or a Subsidiary, the executors or administrators of such Participant's
estate shall be entitled to exercise the vested portion of any Incentive
granted hereunder during the 12-month period following such Participant's
death or the original term of the Incentive, if shorter.
If a Participant's employment with the Corporation or a Subsidiary is
terminated for "Cause," all rights of such Participant under any Incentive shall
expire, be terminated or forfeited upon receipt by such
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Participant of written notice of such termination. For this purpose, the term
"Cause" shall mean (a) the willful and continued failure to a Participant
hereunder to perform his or her duties, as established by the Board of Directors
of the Corporation or a Subsidiary, (b) a material breach by a Participant of
his or her fiduciary duties of loyalty and care to the Corporation (or a
Subsidiary), (c) a Participant's conviction of a felony, or (d) the willful,
flagrant, deliberate and repeated infraction of material published policies and
regulations of the Corporation (or a Subsidiary) of which a Participant has
actual knowledge. The Board of Directors shall determine whether Cause exists
hereunder, in good faith. If the Board determines that Cause has occurred, the
Board of Directors shall provide the affected Participant with written notice of
its decision, including a description of the circumstances constituting such
Cause. The affected Participant shall be provided with a 30-day period (measured
from the date of such notice) within which to cure such Cause. If such Cause is
timely cured (determined in good faith by the Board of Directors), Incentives
awarded to the affected Participant shall be subject to the expiration
provisions of Section 11.4c hereof, unless otherwise specified in the grant or
award evidencing such Incentives.
The Board of Directors may provide with respect to any Incentive granted
hereunder that if a Participant ceases to be an Employee of the Corporation or a
Subsidiary for any reason and then "competes" with the business or operations of
the Corporation or a Subsidiary, such Participant shall forfeit any stock
options not yet exercised, any restricted stock with respect to which the
restrictions have not yet lapsed, and any credits to such Participant's phantom
share account. The Board of Directors shall determine, in accordance with
applicable law, whether a Participant's activity constitutes competition for
purposes of this Section 11.4
11.5 Additional Legal Requirements. The obligation of the Corporation or
any of its Subsidiaries to deliver Common Stock to any Participant hereunder
shall be subject to all applicable laws, regulations, rules and approvals deemed
necessary or appropriate by the Corporation. Certificates for shares of Common
Stock issued pursuant to this Plan may be legended as the Board of Directors
shall deem appropriate.
11.6 Adjustment. In the event of any merger, consolidation or
reorganization of the Corporation with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then subject
to the Plan the number and kind of shares of stock or other securities to which
the holders of the shares of Common Stock will be entitled pursuant to the
transaction.
In the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the number of shares of Common Stock
then outstanding for which the Corporation does not receive consideration, the
number of shares of Common Stock then subject to the Plan shall be adjusted in
proportion to the change in outstanding shares of Common Stock. In the event of
any such substitution or adjustment, the purchase price of any option, the
performance objectives applicable to any Incentive, and the shares of Common
Stock issuable pursuant to any Incentive shall be adjusted to the extent
necessary to prevent the dilution or enlargement of any right granted hereunder,
determined in the discretion of the Board of Directors.
11.7 Written Agreements. The terms of each Incentive shall be stated in a
plan or agreement approved by the Board of Directors. Neither the Board of
Directors nor the Corporation shall be required to grant any Incentive hereunder
to any Participant, unless such Participant executes such agreements or provides
such representations as the Board of Directors deems appropriate.
11.8 Withholding. The Corporation shall have the right to withhold from
any payment made under the Plan or to collect as a condition of payment, any
taxes required by law to be withheld.
If permitted under the terms and conditions of any specific Incentive
granted hereunder, a Participant required to pay to the Corporation an amount
required to be withheld under applicable income tax laws in connection with a
distribution of Common Stock may satisfy this obligation, in whole or in part,
by electing to have the Corporation withhold from the distribution shares of
Common Stock having a Fair Market Value equal to the amount required to be
withheld. The value of the shares to be withheld shall be based on the Fair
Market Value on the date that the amount of tax to be withheld shall be
determined. Subject to the specific terms and conditions of any Incentive
granted hereunder, the Board of Directors may disapprove of any such election,
may suspend or terminate the right to make elections or may provide with respect
to any Incentive that the right to make elections shall not apply. Once
delivered to the Board of Directors, an election shall be
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irrevocable. Any such election shall comply with such additional restrictions as
may be imposed under Rule 16b-3 promulgated under the Act.
11.9 No Continued Employment. No Participant under the Plan shall have any
right to continue in the employ of the Corporation or a Subsidiary for any
period of time or to any right to continue his or her present or any other rate
of compensation on account of participation in the Plan.
11.10 Amendment and Termination of the Plan. The Board of Directors may
amend or discontinue the Plan at any time, in its sole discretion; provided,
however, that no such amendment or discontinuance shall materially change or
impair, without the consent of each affected Participant, the terms and
conditions of an Incentive previously granted hereunder.
11.11 Immediate Acceleration of Incentives. Notwithstanding any provision
in the Plan or in any Incentive to the contrary and subject to any limitation
imposed under the Act (a) the restrictions on all shares of restricted stock
awarded under the Plan shall immediately lapse, (b) all outstanding options
shall become exercisable immediately, and (c) all performance objectives or
other restrictions on Incentives granted under the Plan shall be deemed to be
satisfied or lapsed and payment made immediately, upon the occurrence of a
Change in Control. Incentives subject to the provisions of this Section 11.11
shall be and remain exercisable for the 24-month period following any such
Change in Control.
11.12 Governing Law. The Plan and any Incentive granted under the Plan
shall be governed by the laws of the State of Arkansas.
11.13 Other Benefits. Incentives granted to a Participant under the terms
of the Plan shall not impair or otherwise reduce such Participant's
compensation, life insurance or other benefits provided by the Corporation or
its Subsidiaries; provided, however, that the value of Incentives shall not be
treated as compensation for purposes of computing the value or amount of any
such benefit.
11.14 Deferral. If permitted by the Board of Directors, a Participant may
elect to enter into a written agreement with the Corporation providing for the
deferral of any form of payment hereunder (whether in the form of cash or Common
Stock), subject to such terms and conditions as the Board of Directors may deem
appropriate.
THIS PLAN was adopted by the Board of Directors of First United Bancshares,
Inc. on March 15, 1999, to be effective as of the time determined under Section
11.1 hereof.
FIRST UNITED BANCSHARES, INC.
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<PAGE> 41
FIRST UNITED BANCSHARES, INC.
Main and Washington Streets El Dorado, Arkansas 71730
ANNUAL STOCKHOLDERS MEETING, May 25, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder(s) of FIRST UNITED BANCSHARES, INC., hereby
constitutes and appoints JAMES V. KELLEY and JOHN G. COPELAND, or either of
them, the true and lawful agent and attorney-in-fact for the undersigned, with
full powers of substitution, and hereby authorizes them to represent and to
vote, as designated below, all of the shares of common stock owned by the
undersigned or registered in the name of the undersigned on March 25, 1999, at
the Annual Meeting of Stockholders to be held on May 25, 1999, at 2:00 p.m., or
at any and all adjournments thereof.
1. Proposal to elect the following nominees as directors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] WITHHOLD AUTHORITY
E. Larry Burrow, Claiborne P. Deming, Al Graves, Jr., Tommy Hillman, James V.
Kelley, Roy E. Ledbetter, Michael F. Mahony, Richard H. Mason, Jack W.
McNutt, George F. Middlebrook, III, R. Madison Murphy, Robert C. Nolan, Cal
Partee, Jr., Carolyn Tennyson and John D. Trimble, Jr.
THE UNDERSIGNED STOCKHOLDER(S) MAY WITHHOLD AUTHORITY TO VOTE FOR ANY SINGLE
NOMINEE BY LINING THROUGH OR OTHERWISE STRIKING OUT THE NAME OF ANY NOMINEE. IF
THIS PROXY IS EXECUTED BY THE UNDERSIGNED STOCKHOLDER(S) AS NOT TO WITHHOLD
AUTHORITY TO VOTE FOR THE ELECTION FOR ANY NOMINEE, THIS SHALL BE DEEMED TO
GRANT SUCH AUTHORITY.
2. Proposal to ratify the appointment of Arthur Andersen LLP as the independent
auditors of the Company.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] WITHHOLD AUTHORITY
3. Proposal to consider and adopt the First United Bancshares, Inc. Employees'
Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] WITHHOLD AUTHORITY
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting of Stockholders or
any and all adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, AND 3.
Dated:
-----------------------------------
-----------------------------------
(signature)
-----------------------------------
(signature if jointly held)
Please sign exactly as the name
appears on your stock
certificate(s). When shares are
held by joint tenants, both should
sign. When signing as attorney,
executor, administra tor, trustee
or guardian, please sign in full
corporate name and have signed by
the president or other duly
authorized officer. If a
partnership, please sign in
partnership name by the authorized
person.
Please mark, sign, date and return
this proxy card promptly, using the
enclosed envelope.
IF YOU PLAN ON ATTENDING THE ANNUAL
STOCKHOLDERS MEETING IN PERSON,
PLEASE INDICATE SO BY CHECKING THE
FOLLOWING BOX. [ ]
