<PAGE> 1
SCHEDULE 14A-INFORMATION REQUIRED IN PROXY
STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE
ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NATIONAL BANCSHARES CORPORATION OF TEXAS
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.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
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<PAGE> 2
April 29, 1998
Dear Shareholder,
You are cordially invited to attend the 1998 Annual Meeting of Shareholders of
National Bancshares Corporation of Texas to be held on Friday, May 29, 1998 at
10:30 a.m. at the Plaza San Antonio Hotel in San Antonio, Texas. We look forward
to this opportunity to update you on the current activities of the Company.
The notice of meeting and proxy statement following this letter describe the
business expected to be transacted at the meeting. Whether or not you expect to
be present and regardless of the number of shares you own, please mark, sign and
mail the enclosed proxy card in the envelope provided so that your shares will
be represented.
Sincerely,
Jay H. Lustig
Chairman of the Board
Marvin E. Melson
President
A Company of Community Banks
<PAGE> 3
NATIONAL BANCSHARES CORPORATION OF TEXAS
104 East Mann Road
Laredo, Texas 78042
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 29, 1998
- --------------------------------------------------------------------------------
To the Shareholders of National Bancshares Corporation of Texas:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders of
National Bancshares Corporation of Texas, a Texas corporation, will be held at
The Plaza San Antonio Hotel in San Antonio, Texas on Friday, May 29, 1998, at
10:30 a.m. for the following purposes:
(1) To elect five directors to serve until the 1999 Annual Meeting
of Shareholders and until their successors are duly elected
and qualified;
(2) To approve the amendment of the 1995 Stock Plan;
(3) To approve the appointment of auditors for the 1998 fiscal
year; and
(4) To transact such other business as may properly come before
the meeting or any adjournment thereof.
In accordance with the bylaws of the Company and a resolution of the
Board of Directors, the record date for the meeting has been fixed at April 29,
1998. Only shareholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
Shareholders who do not expect to attend the meeting in person are
urged to sign the enclosed proxy card and return it promptly in the accompanying
envelope. This will ensure that your vote is counted, whether or not you are
able to be present.
By order of the Board of Directors,
Marvin E. Melson
President and Secretary
April 29, 1998
<PAGE> 4
NATIONAL BANCSHARES CORPORATION OF TEXAS
104 EAST MANN RD.
LAREDO, TEXAS 78042
- --------------------------------------------------------------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 29, 1998
- --------------------------------------------------------------------------------
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of National Bancshares Corporation of Texas, a
Texas corporation (the "Company"), to be used at the 1998 Annual Meeting of
Shareholders on Friday, May 29, 1998, at 10:30 a.m., or at any adjournment
thereof. This proxy statement and the accompanying proxy card are being mailed
to shareholders beginning on or about May 1, 1998.
The Company's Annual Report to Shareholders for the year ended December
31, 1997 is being furnished with this Proxy Statement to the shareholders of
record on April 29, 1998. The Annual Report to Shareholders does not constitute
a part of the proxy soliciting material.
VOTING AND PROXIES
Only holders of record of the Company's Common Stock, par value $.001
(the "Common Stock"), at the close of business on April 29, 1998, will be
entitled to vote at the meeting. There were 4,645,834 shares of Common Stock
outstanding on the record date, each entitled to one vote. A majority of the
shares outstanding will constitute a quorum at the meeting.
All shares represented by proxies will be voted in accordance with the
shareholders' directions. If the proxy card is signed and returned without any
direction given, shares will be voted in accordance with the recommendations of
the Board of Directors as described in this proxy statement. Any shareholder
giving a proxy may revoke it at any time before the proxy is voted by giving
written notice of revocation to the Secretary of the Company, by submitting a
later-dated proxy or by attending the meeting and voting in person.
The election of each nominee for director requires a plurality of the
votes cast. The affirmative vote of a majority of the shares present and voting
at the meeting in person or by proxy is required for approval of the appointment
of auditors and amendments to the Stock Plan. Abstentions and broker non-votes
will be included in determining the presence of a quorum at the meeting.
Abstentions and broker non-votes will not be included in determining the number
of votes cast on any matter.
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The bylaws of the Company provide for a Board of Directors of five (5)
members. All of the current directors have been nominated by the Board of
Directors for re-election to serve until the 1999 Annual Meeting of Shareholders
and until their successors are duly elected and qualified. The current directors
are Jay H. Lustig, Marvin E. Melson, H. Gary Blankenship, John W. Lettunich, and
Charles T. Meeks. The Board of Directors recommends a vote FOR such nominees.
The nominees named in the accompanying proxy, who have been designated
by the Board of Directors, intend to vote for the above mentioned nominees for
election as directors, unless otherwise specified. Such nominees have indicated
a willingness to serve as directors, but should any of them decline or be unable
to serve, the persons named as proxies may vote for another person in the place
of such nominee according to their best judgment and in the interest of the
Company.
<PAGE> 5
The following information is furnished with respect to each of the
nominees. Such information includes all positions with the Company and principal
occupations during the last five years.
NOMINEES FOR ELECTION
JAY H. LUSTIG, Mr. Lustig, age 43, has been Chairman of the Board of
the Company since May 1992. Mr. Lustig has been the Chairman of the Board and
CEO of NBI, Inc., a publicly traded holding company, since 1993. In May 1995,
Mr. Lustig became President of Equibond, Inc., an investment firm based in Santa
Monica, California. From September 1988 to May 1995, Mr. Lustig had been
associated with Drake Capital Securities, Inc., an NASD member, via J.H.L.
Holdings, Inc., a personally owned investment holding company.
MARVIN E. MELSON, age 62, has been a Director, President, and Secretary
of the Company since May 1992; Chairman of the Board of NBC-Laredo and a
Director of NBC-Eagle Pass and NBC-Rockdale since May 1992; and President of
NBC-Laredo since August 1993; and Director of NBC-Luling since September 1996.
Mr. Melson served as Executive Vice President and Commercial Loan Officer at
Laredo National Bank, Laredo, Texas, from August 1989 to May 1992. From March
1981 to August 1989, Mr. Melson served as Chairman of the Board and President of
NBC-Laredo.
H. GARY BLANKENSHIP, age 57, has been a Director of the Company since
May 1992. Mr. Blankenship has been Chairman and CEO of Greater Southwest
Bancshares, Inc., and its subsidiary, Bank of the West, Irving, Texas, since
1986 (neither of which entities is affiliated with the Company).
JOHN W. LETTUNICH, age 68, has been Chairman of the Board of NBC-Eagle
Pass since January 1997. Mr. Lettunich was Chairman of the Board, President and
CEO of NBC-Eagle Pass from 1989 to January 1997. He became a Director of the
Company in March 1995.
CHARLES T. MEEKS, age 63, has been a Director of the Company since
March 1995. Since July 1994, Mr. Meeks has been the principal of the Charles T.
Meeks Company, a bank consulting firm. Mr. Meeks was Senior Vice President, Alex
Sheshunoff Management Services, Inc., from February 1989 to June 1994. Mr. Meeks
is also Chairman of the Board of Texline State Bank in Texline, Texas.
No family relationships exist among the named executive officers and
directors of the Company.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
MEETINGS AND COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1997, the Board of Directors
held four (4) meetings. During the fiscal year ended December 31, 1997, no
director attended fewer than seventy-five percent (75%) of the aggregate of (i)
the total number of meetings of the Board of Directors held during the period
for which he has been a director, and (ii) the total number of meetings held by
all committees on the Board of Directors on which he has served.
Each outside director receives $1,500 for attending each meeting of the
Board of Directors of the Company and is eligible to participate in certain of
the Company's stock option plans.
Audit Committee. The Audit Committee of the Board of Directors, which currently
consists of H. Gary Blankenship, John Lettunich, and Charles T. Meeks met one
(1) time during the 1997 fiscal year. The functions of the Audit Committee are
to recommend the selection of independent accountants, review and recommend
approval of annual audited financial statements, review significant changes in
accounting policies and procedures and monitors the internal audit reports for
each subsidiary of the Company. In addition, the Audit Committee reviews the
adequacy of internal controls and record-keeping systems, reviews compliance
with applicable regulations and
2
<PAGE> 6
policies (including environmental regulations and policies on insider trading),
and monitors litigation, fraud, and conflict of interest and their potential
impact on financial results.
Compensation Committee. The Compensation Committee of the Board of Directors
currently consists of Jay H. Lustig, H. Gary Blankenship and Charles T. Meeks.
The Compensation Committee met two (2) times during the 1997 fiscal year. The
functions of the Compensation Committee are to review the compensation of
officers and other management personnel and to make recommendations concerning
such compensation. The Compensation Committee also administers the employee
benefit plans of the Company, including the Company's 1995 Stock Plan ("the 1995
Plan"). No officer of the Company is a member of the Compensation Committee.
Nominating Committee. The Board of Directors acts as the Company's Nominating
Committee.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Banks, from time to time, have entered into transactions with their
respective directors, executive officers, and their affiliates. Such
transactions were made in the ordinary course of business on substantially the
same terms and conditions, including interest rates and collateral, as those
prevailing at the same time for comparable transactions with other customers,
and did not, in the opinion of management, involve more than normal credit risk
or present other unfavorable features. The aggregate amount of loans to such
related parties at December 31, 1997 and 1996, was $4,203,000 and $3,702,000,
respectively. None of such transactions have been entered into with the
Company's Chairman of the Board, Mr. Lustig or directors, Messrs. Blankenship,
Lettunich or Meeks in 1997 or 1996. During the years ended December 31, 1997 and
1996, new loans to such related parties amounted to $1,405,000 and $1,580,000,
respectively, and repayments amounted to $904,000 and $2,725,000, respectively.
During fiscal year 1997, Mr. Melson had loans outstanding of, at a high, $80,000
of which $79,000 was outstanding at fiscal year end. During fiscal year 1996,
Mr. Melson had loans outstanding at a high, $285,000 of which $70,000 was
outstanding at year-end. At December 31, 1997 and 1996, the percentage of
shareholders' equity represented by aggregate loans to insiders was 8% and 9%,
respectively.
During 1997, the Company utilized a stock brokerage firm, which is 100%
owned by Mr. Lustig, to execute certain transactions on its behalf. The Company
uses an unrelated company to act as custodian and clearing firm for its
investment assets. Net revenues earned by the brokerage firm related to
investment transactions by the Company in 1997 totaled $1,579 on purchase and
sale transactions of $6,137,000.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and any persons holding more than ten
percent of the Company's Common Stock to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities Exchange Commission and to provide copies of such reports to the
Company. Based upon the Company's review of copies of such reports received by
the Company and written representations of its directors and executive officers,
the Company believes that during the year ended December 31, 1997, all Section
16(a) filing requirements were satisfied except for an inadvertent late filing
of a Form 4 by Jay H. Lustig and a Form 3 by Morris D. Weiss.
3
<PAGE> 7
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of February 20, 1998, as
to shares of Common Stock beneficially owned by (i) each director of the
Company, (ii) the directors and executive officers of the Company as a group,
and (iii) each person known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of Common Stock. Except as otherwise
indicated and subject to applicable community property laws, each person has
sole investment and voting power with respect to the shares shown. Ownership
information is based upon information furnished by the respective individual or
entities, as the case may be.
<TABLE>
<CAPTION>
SHARES % OF TOTAL
BENEFICIALLY SHARES
OWNED OUTSTANDING
------------ -----------
<S> <C> <C>
5% SHAREHOLDERS, OFFICERS AND DIRECTORS(1)
Jay H. Lustig(5) ............................................. 259,075 5.43%
Marvin E. Melson(3) .......................................... 136,631 2.86%
H. Gary Blankenship(2) ....................................... 37,562 *
John W. Lettunich(3) ......................................... 70,568 1.48%
Charles T. Meeks(2) .......................................... 26,000 *
Hakatak Enterprises, Inc., Nominee (4) ....................... 300,000 6.29%
Heinz Steinman ............................................... 263,771 5.53%
All directors and executive officers as a group (7 persons)(6) 531,136 11.13%
</TABLE>
- ----------------------------
* Less than one percent
(1) The business address of the directors and officers of the Company is the
Company's business address; the mailing address of Hakatak Enterprises,
Inc. is P.O. Box 1623, Pacific Palisades, CA 90272; and the mailing address
of Mr. Steinman is 5797 Cedar Street, P.O. Box 327, Wrightwood, CA 92397.
(2) The number of shares beneficially owned by Messrs. Blankenship and Meeks
includes 21,000 shares of Common Stock reserved for issuance under stock
options which are exercisable by each of them within sixty (60) days of
February 20, 1998. ( 7,000 shares are subject to shareholder approval for
each of them).
(3) The number of shares beneficially owned by Messrs. Melson and Lettunich
includes 26,000 and 25,000 shares of Common Stock reserved for issuance
under stock options which are exercisable by each of them within sixty (60)
days of February 20, 1998.
(4) Hakatak Enterprises, Inc., Nominee, holds its shares as nominees for HP
Partners, a California limited partnership, Tamir Hacker, an individual,
and Tamir and Teri Hacker as joint tenants. Of the shares held by Hakatak
Enterprises, Inc., Nominee, 270,000 are for HP Partners, 15,000 are for
Tamir Hacker and 15,000 are for Tamir and Teri Hacker.
(5) The number of shares beneficially owned by Mr.Lustig includes 180,225
shares of Common Stock owned of record; 22,250 shares of Common Stock owned
by his wife and children, 35,600 shares in Prophecy Partners, a Delaware
limited partnership; and 21,000 shares of Common Stock options which are
exercisable within sixty (60) days of February 20, 1998.
(6) The number of shares of Common Stock beneficially owned by the directors
and officers as a group includes 114,300 shares of Common Stock reserved
for issuance under stock options which are exercisable within sixty (60)
days of February 20, 1998. See footnotes (2),(3) and (5) above.
4
<PAGE> 8
EXECUTIVE COMPENSATION
BOARD COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Committee") is committed to maintaining compensation programs for the
Company's executive officers which further the Company's mission. We,
therefore, adhere to the following compensation policies which are intended
to facilitate the achievement of the Company's business strategies:
o Compensation levels for each element of pay should be targeted at rates
that are reflective of the median levels of current market practices
prevalent in comparable financial institutions. Offering
market-comparable pay allows the Company to attract and maintain a
stable, successful management team.
o The Company's compensation packages should strengthen the relationship
between pay and performance with variable, at-risk compensation that is
dependent upon the level of success in meeting specified Company and
individual performance goals.
o Ownership of the Company's Common Stock by executives should be
encouraged to further align executives' interests with those of
shareholders and the Company and to promote a continuing focus on
building profitability and shareholder value.
o Sustained superior performance by individual executives over a period
of years, including actions to increase revenues, reduce expenses,
enhance service and product quality, improve market share and thereby
enhancing shareholder value, should be rewarded.
To preserve objectivity in the achievement of its goals, the Committee
is comprised of three independent, non-employee directors. It is the Committee's
overall goal to develop compensation policies that are consistent with and
linked to strategic business objectives and Company values. The Committee
approves the design of, assesses the effectiveness of, and administers
compensation programs in support of compensation policies. The Committee also
reviews all salary arrangements and other remuneration for all executive
officers of the Company and the Subsidiary Banks. The various components of the
compensation programs for executive officers are discussed below.
BASE SALARY. Base salary levels are largely determined through
comparison with banking organizations of a size similar to the Company's.
Surveys are utilized to establish base salaries that are within the range of
those persons with similar years of experience and holding positions of
comparable responsibility at other banking organizations of a size and
complexity similar to the Company. Following the determination of market-based
pay, each officer's individual performance, achievements, and contributions to
the growth of the Company are evaluated subjectively in determining the
individual's base salary. The Committee reviews the base salary of all executive
officers on an annual basis.
INCENTIVE BONUS PLAN. In March 1995, the Board of Directors of the
Company adopted a Performance Compensation Plan (the "Plan") for its employees
and the employees of its subsidiary Banks. The Plan is administered by the
Committee. The amount of money available for distribution in the Plan is
dependent upon the attainment of performance objectives which the Committee
believes are important for achieving long-term shareholder value. The President
of the Subsidiary Banks, in consultation with one or more principal officers of
the respective Bank, determines the amount which will be awarded from the Plan
to the employees of the Bank. The amount of the bonus available for the
Presidents of the Subsidiary Banks is determined by the Committee. The Plan
rewards all employees based on the attainment of certain performance goals of
the Company and its subsidiaries. The officers of the Company are eligible to
participate at the same level as all employees in relationship to their
respective base salaries. The performance goals effective for 1997 included
specific goals for profits, asset quality and operational productivity. All
awards under the Plan are contingent on the Company and the Subsidiaries
attaining certain basic financial objectives such as return on assets.
5
<PAGE> 9
STOCK OPTIONS. On May 26, 1995, the Shareholders of the Company adopted
the 1995 Stock Plan (the "1995 Plan"). It is the Company's philosophy that
awarding stock options to executive officers of the Company and Subsidiary
Banks, based upon their respective positions and contributions to the Company's
overall success will help attract and retain high quality, results-oriented
professionals committed to creating long term shareholder value. Additionally,
because options are subject to forfeiture if the employee leaves the Company
prior to their becoming exercisable, options provide an incentive to remain with
the Company long term. Options granted in 1997 become exercisable in one-fifth
increments beginning one year from the date of the grant. The option price for
shares is the fair market value of the shares on the date of the grant. The
Named Executives who have received options under the 1995 Plan are, Marvin E.
Melson, who has received 38,000 options, after amendment, and Jay H. Lustig who
has received 32,000 options, after amendment, and John W. Lettunich who has
received 28,000 options, after amendment.
1997 COMPENSATION OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Melson serves as the president and chief executive officer of the
Company and as the president and chief executive officer of NBC Bank-Laredo,
N.A. Mr. Melson's 1997 base salary is governed by his employment agreement
entered into by the Company and Mr. Melson in 1997, as described later in this
Proxy Statement. His salary is comparable to a survey of peer group
institutions. Mr. Melson participates in the incentive bonus plan at the Company
level. In 1997 he earned an incentive bonus of $30,000, which is approximately
18% of his base salary, which is lower than the average in the survey of the
peer group. The incentive bonus was based on attaining certain performance goals
including return on assets and net income. In 1997, Mr. Melson was awarded
options to purchase 12,000 shares with an exercise price of $13.25, of which
7,000 of those shares are pending shareholder approval. With the 1997 grant, Mr.
Melson has the right to purchase 38,000 shares of the Company's Common Stock. He
is vested in 17,333 of these shares as of December 31, 1997. Mr. Melson's option
grant was based on the Company's growth and performance and was in keeping with
the Committee's intent to place emphasis on long term incentives to remain with
the Company which is tied directly to the success of the Company, and,
correspondingly, that of the shareholders.
CONCLUSION
The Committee believes these executive compensation policies and
programs serve the interests of shareholders and the Company effectively and
that the various pay vehicles offered are appropriately balanced to provide
increased motivation for executives to contribute to the Company's overall
future successes, thereby enhancing the value of the company for the
shareholders' benefit.
The Committee will continue to monitor the effectiveness of the
company's total compensation program to meet the current needs of the Company.
Jay H. Lustig, Chairman
H. Gary Blankenship
Charles T. Meeks
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation committee of the Board of Directors of
the Company was, during 1997, an officer or employee of the Company or any of
its subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries or had any relationships requiring disclosure by the company under
Item 404 of Regulation S-K. During 1997, no executive officer of the Company (i)
served as a member of the compensation committee of another entity, one of whose
executive officers served on the Compensation Committee of the Company, (ii)
served as a director of another entity, one of whose executive officers served
on the Compensation Committee of the Company, or (iii) was a member of the
compensation committee of another entity, one of whose executive officers served
as a director of the Company.
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<PAGE> 10
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth summary compensation information with
respect to the Company's chief executive officer, and the most highly
compensated executive officers of the Company who earn over $100,000 in
annual salary and bonus ("the Named Executives"), for the years ended
December 31, 1997, 1996 and 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------- ----------------------
NUMBER OF SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING OPTIONS/SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED(#)(2) COMPENSATION(1)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jay H. Lustig 1997 $ 60,000 $ 16,250 $ -- 11,000 --
Chairman of the 1996 $ 60,000 $ 6,000 -- -- --
Company 1995 $ 60,000 -- -- 21,000 --
Marvin E. Melson 1997 $164,000 $ 30,000 $ -- 12,000 $ 4,510
President of the 1996 $164,000 $ 16,400 -- -- $ 3,040
Company 1995 $164,000 $ 16,400 -- 26,000 $ 3,428
John W. Lettunich 1997 $110,000 $ 26,000 $ -- 7,000 $ 4,029
Chairman of NBC 1996 $110,000 $ 51,150 -- -- $ 2,635
Bank - Eagle Pass 1995 $110,000 $ 51,150 -- 21,000 $ 2,592
</TABLE>
- ----------------------
(1) All other compensation reflects payments by the Company to the Company's
401(k) Plan on behalf of Named Executives.
(2) The total options granted includes the following options which are subject
to approval by the shareholders: 7,000 for Messrs. Lustig, Melson, and
Lettunich.
The following table sets forth the options granted to the Named Executive
officers in fiscal year 1997 under the Company's 1995 Plan. No stock
appreciation rights ("SAR's") have been granted by the Company to any of the
Named Executive officers.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------------
NAME GRANTED(2) FISCAL YEAR (1) ($/SHARE) DATE 5% 10%
- -------------------- ------------- -------------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jay H. Lustig 11,000 14.3 % $13.25 06/25/2004 $59,335 $138,275
Marvin E. Melson 12,000 15.6 % $13.25 06/25/2004 $64,729 $150,846
John W. Lettunich 7,000 9.1 % $13.25 06/25/2004 $37,759 $ 87,994
</TABLE>
- --------------------
(1) Based on 76,850 options granted to all employees in 1997.
(2) The number of options granted includes the following options subject to
approval of the shareholders: Jay H. Lustig, 7,000, Marvin E. Melson, 7,000
and John W. Lettunich, 7,000.
7
<PAGE> 11
OPTION EXERCISES AND VALUATION
The table below reports exercises of stock options by the Named
Executives during fiscal year 1997 and the value of their unexercised stock
options as of December 31, 1997. The stock options were granted pursuant to the
Company's 1994 and 1995 Plans.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/97 OPTIONS AT 12/31/97
ACQUIRED ON VALUE ------------------------------- ------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE(1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Jay H. Lustig - $ - 14,000 18,000 $178,500 $152,500
Marvin E. Melson - - 17,333 20,667 $220,996 $179,504
John W. Lettunich - - 17,000 16,000 $218,460 $156,140
</TABLE>
- ---------------
(1) The value of unexercised options is based on the difference between the
closing sales price of $19 per share of Common Stock on December 31, 1997
and the option's exercise price
(2) The following shares are included above that are pending shareholder
approval; Jay Lustig, Marvin Melson, and John Lettunich at 7,000 options
each.
DEFERRED COMPENSATION
No deferred compensation has been awarded to the Named Executives.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Jay H. Lustig,
Marvin E. Melson and Morris D. Weiss. Mr. Lustig's agreement, effective as of
October 1, 1992, provides that he shall serve, at the pleasure and direction of
the Company's Board of Directors, as the Chairman of the Board of the Company.
Upon the expiration of the initial three year term, the agreement shall be
automatically renewed for successive periods of one year each, unless, not later
than 30 days prior to the end of the initial term or any renewal term, either
party has given notice that it does not wish to extend the agreement. During the
term of employment, the agreement provides for an annual base salary of $60,000.
Mr. Lustig is also eligible to participate in any other compensation, tax
benefit or other benefit plan of the Company, and is entitled to reimbursement
of all reasonable and customary expenses incurred in performing services
thereunder in accordance with the Company's policies and procedures. Mr.
Lustig's employment agreement also provides that in the event the Company
terminates or elects not to renew the agreement other than for cause (or if the
Company breaches the agreement), Mr. Lustig will receive the greater of the
amount of salary for he would have otherwise received for the partial term
remaining or six month's salary at the rate then in effect for such period,
payable in a lump sum within 30 days of termination. The agreement obligates the
Company to indemnify and hold harmless the employee to the fullest extent
authorized or permitted by Texas law, and to the fullest extent so permitted, to
require the Company to advance expenses on behalf of the employee as incurred.
On January 1, 1997, Mr. Melson entered into an employment agreement
with the Company. The term of this agreement is for two years, with a provision
for automatic renewal for continuing one year terms unless either the Company or
Mr. Melson gives prior notice of their intention not to continue with the
agreement. Pursuant to the agreement, Mr. Melson is to receive an annual base
salary of $164,000 to be paid by the Company. Mr. Melson is
8
<PAGE> 12
also eligible to participate in any other compensation, tax benefit or other
benefit plan of the Company. Mr. Melson is, in addition, entitled to the use of
a Company automobile or to reimbursement for auto rental expenses related to his
employment if no Company automobile is available. If Mr. Melson is unable to
perform his duties under this agreement as a result of incapacity due to
physical or mental illness, Mr. Melson is entitled to receive, and not in lieu
of any disability benefits, the full salary he would have otherwise received
under this agreement for the partial term remaining in the then current term of
this agreement plus, as a lump sum, an additional amount equal to the greater of
(i) the amount of salary Mr. Melson would have otherwise received for the
partial term remaining in the then current term, or (ii) six months' salary at
the rate in effect for such period ("the Additional Amount"). If Mr. Melson's
employment is terminated by death, the Company shall pay to Mr. Melson's legal
representative or beneficiary, the full salary he would have received under this
agreement for the partial term remaining in the current term of this agreement
plus the Additional Amount. If Mr. Melson's employment is terminated for cause,
Mr. Melson shall receive all amounts due to him through thirty days after notice
of termination has been given. The agreement obligates the Company to indemnify
and hold harmless the employee to the fullest extent authorized or permitted by
Texas law, and to the fullest extent so permitted, to require the Company to
advance expenses on behalf of the employee as incurred.
On April 7, 1997, Mr. Weiss entered into an employment agreement with
the Company to serve as General Counsel of the Company. Mr. Weiss will devote
substantial but not exclusive attention to the affairs of the Company, it being
understood that Mr. Weiss is simultaneously entering into consulting
arrangements, with unrelated businesses and will be devoting substantial
attention to such other entities as well. The term of this agreement is for
three years, with a provision for automatic renewal for one year terms unless
either the Company or Mr. Weiss gives prior notice, not later than ninety (90)
days prior to the initial term or renewal term, of their intention not to
continue with the agreement. Pursuant to the agreement, Mr. Weiss is to receive
an annual base salary of $75,000 to be paid by the Company. Mr. Weiss is also
eligible to participate in any other compensation, tax benefit or other benefit
plan of the Company and is entitled to reimbursement of all reasonable and
customary expenses incurred in performing services thereunder in accordance with
the Company's policies and procedures. Mr. Weiss' employment agreement also
provides that in the event the Company terminates or elects not to renew the
agreement other than for cause (if Company breaches the agreement) or if there
is a change in control, Mr. Weiss will receive the greater of, the amount of
salary for he would have otherwise received for the partial term remaining, six
month's salary at the rate then in effect for such period, or any severance
payable under the then current policy of the Company, payable in a lump sum
within 30 days of termination. The agreement obligates the Company to indemnify
and hold harmless the employee to the fullest extent authorized or permitted by
Texas law, and to the fullest extent so permitted, to require the Company to
advance expenses on behalf of the employee as incurred.
PENSION AND PROFIT SHARING PLANS
During 1993, the Company adopted a defined contribution profit sharing
plan (the "401(k) Plan") for the benefit of substantially all employees. The
401(k) Plan includes a 401(k) retirement plan feature. Employees are allowed to
make contributions to the 401(k) Plan. Each subsidiary Bank's contribution to
the 401(k) Plan is determined annually by that Bank's Board of Directors. Profit
sharing expense for the years ended December 31, 1997 and 1996, totaled $104,873
and $49,515, respectively. Three Named Executives received contributions to the
401(k) Plan in 1997 and 1996: John W. Lettunich received $4,029 in 1996 and
$2,635 in 1996; and Marvin E. Melson received $4,510 in 1997 and $3,040 in 1996.
APPROVAL OF AMENDMENT OF THE 1995 STOCK PLAN
(ITEM 2 ON PROXY CARD)
The purpose of the Company's 1995 Stock Plan (the "1995 Plan") is to
provide incentives to its officers, employees and directors and to help the
Company attract and retain qualified officers, employees and directors. Based on
the Company's experience with the 1995 Plan since its adoption, the Board of
Directors has unanimously approved and recommends for adoption the amendments to
the 1995 Plan described below which the Directors
9
<PAGE> 13
believe will enhance the 1995 Plan's effectiveness. Accordingly, the Board of
Directors recommends that the shareholders vote FOR approval to increase the
maximum number of shares of Common Stock under the 1995 Plan from 214,000 to
444,000. The 1995 Plan currently provides that the maximum number of shares
issuable under the 1995 Plan is 214,000 shares less the number of shares
issuable or issued under the Plan and the Company's 1994 Non-Qualified Stock
Option Plan (the "1994 Plan"). As of December 31, 1997, 170,900 shares have been
issued under the 1995 Plan, and 29,000 shares have been issued under the 1994
Plan. As a result, as of December 31, 1997, only 14,100 shares are currently
available for issuance under the 1995 Plan. The Board of Directors believes this
number of shares is insufficient for the Company to continue its efforts to
attract and retain qualified officers, employees and directors. Accordingly, the
Board of Directors recommends that the maximum number of shares issuable under
the 1995 Plan be increased from 214,000 to 444,000 shares. If this amendment to
the 1995 Plan is approved, 280,100 shares will become available for issuance
under the 1995 Plan; however, at least 40,850 shares and potentially an
additional 15,500 shares, have been granted subject to shareholder approval,
leaving no more than 204,450 shares to be granted. A copy of the 1995 Stock Plan
is included in Appendix A.
APPOINTMENT OF AUDITORS
(ITEM 3 ON PROXY CARD)
The Board of Directors of the Company has appointed the firm Padgett,
Stratemann & Co., L.L.P., to audit the accounts of the Company for the 1998
fiscal year. Padgett, Stratemann & Co., L.L.P. has audited the Company's
financial statements since 1992. Padgett, Stratemann & Co., L.L.P., also
performs an annual audit of the consolidated financial statements of the Company
and performs periodic agreed-upon internal audit procedures at the Banks.
Representatives of Padgett, Stratemann & Co., L.L.P. are expected to be present
at the Annual Meeting of Shareholders with the opportunity to make a statement
if they desire to do so and are expected to be available to respond to
appropriate questions.
Approval of the appointment of auditors is not a matter which is
required to be submitted to a vote of shareholders, but the Board of Directors
considers it appropriate for the shareholders to express or withhold their
approval of the appointment. If shareholder approval should be withheld, the
Board would consider an alternative appointment for the succeeding year. The
Board recommends that the shareholders vote FOR approval of the appointment of
Padgett, Stratemann & Co., L.L.P. as independent auditors of the Company. The
affirmative vote of a majority of the shares present and voting at the meeting
in person and by proxy is required for approval.
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<PAGE> 14
PERFORMANCE GRAPH
Below is a performance graph comparing the cumulative total shareholder
return on National Bancshares Corporation of Texas common Stock with the
cumulative total return of companies on the Standard & Poor's 500 Stock Index
and American Stock Exchange Bank Index.
[GRAPH]
<TABLE>
<CAPTION>
PERIOD ENDING
-------------------------------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
National Bancshares Corp. 100.00 366.67 520.83 854.17 1,000.00 1,583.33
S&P 500 100.00 110.08 111.53 153.44 188.52 251.44
SNL AMEX Bank Index 100.00 108.10 116.97 171.92 222.28 379.40
</TABLE>
11
<PAGE> 15
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of shareholders intended to be presented at the 1999 Annual
Meeting of Shareholders must be received in writing by the Company at its
corporate office no later than December 23, 1998. The Company's corporate office
is located at 104 East Mann Road, Laredo, Texas 78042.
The cost of soliciting proxies will be borne by the Company. To assist
in the proxy solicitation, the Company has engaged Corporate Investors
Communications, Inc. for a fee of $2,000, plus reimbursement for out-of-pocket
expenses. Proxies may be solicited through the mail and through telephonic or
telegraphic communication to, or by meeting with, shareholders or their
representatives by directors, officers, and other employees of the Company who
will receive no additional compensation therefor.
The Company requests persons such as brokers, nominees and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy material to their
principals and to request authority for the execution of the proxy. The Company
reimburses such persons for their reasonable expenses.
OTHER MATTERS
No business other than the matters set forth in this proxy statement is
expected to come before the Annual Meeting, but should any other matters
requiring a vote of shareholders arise, including a question of adjourning the
Annual Meeting, the persons named in the accompanying proxy will vote thereon
according to their best judgment in the interest of the Company.
By Order of the Board of Directors,
------------------------------------
Marvin E. Melson
President & Secretary
Dated: April 29, 1998
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<PAGE> 16
APPENDIX A
NATIONAL BANCSHARES CORPORATION OF TEXAS
1995 AMENDED AND RESTATED STOCK PLAN
1. Purpose. This 1995 Stock Plan (the "Plan") is intended to provide incentives
(a) to the officers and other employees of National Bancshares Corporation of
Texas (the "Company"), its parent (if any) and any present or future
subsidiaries of the Company (collectively, "Related Corporations") by providing
them with opportunities to purchase stock in the Company pursuant to options
granted hereunder which qualify as "incentive stock options" under Section
422A(b) of the Internal Revenue Code of 1986, as amended (the "Code") ("ISO" or
"ISOs"); (b) to directors, officers, employees and consultants of the Company
and Related Corporations, or any other person or entity, by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as ISOs ("Non-Qualified Option" or "Non-Qualified
Options"); (c) to directors, officers, employees and consultants of the Company
and Related Corporations, or any other person or entity, by providing them with
awards of stock in the Company ("Awards"); (d) to directors, officers, employees
and consultants of the Company and Related Corporations, or any other person or
entity, by providing them with Stock Appreciation Rights ("SAR" or "SARs") in
tandem with, or independently of, options granted hereunder; (e) to directors,
officers, employees and consultants of the Company and Related Corporations, or
any other person or entity, by providing them with performance awards in the
form of units ("Units") representing phantom shares of stock ("phantom share" or
"phantom shares"), each Unit representing one phantom share; (f) to directors,
officers, employees and consultants of the Company and Related Corporations, or
any other person or entity, by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases"); and (g) to outside directors
(i.e., any director who is not an employee of the Company) by providing each of
them with annual grants of seven-year options to purchase 7,000 shares of Common
Stock ("Outside Directors' Options").
ISOs, Non-Qualified Options and Outside Directors' Options are referred
to hereafter individually as an "Option" and collectively as "Options." Options,
Awards, SARs, Units and authorizations to make Purchases are referred to
hereafter collectively as "Stock Rights." Recipients of such Stock Rights are
hereafter referred to individually as an "Optionee" and collectively as
"Optionees." As used herein, the terms "parent" and "subsidiary" mean "parent
corporation" and "subsidiary corporation" respectively, as those terms are
defined in Section 425 of the Code.
2. Administration of the Plan. The Plan shall be administered by (i) the Board
of Directors (the "Board") or (ii) a committee or subcommittee appointed by the
Board (the "Committee") from among its members (collectively, the
"Administrators"). Unless the Board determines otherwise, the Committee shall be
comprised solely of not less than two members who each shall qualify as (i) a
"Non-Employee Director" within the meaning of Rule 16b-3 (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act") and (ii) an "outside director" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). Subject to terms of the
Plan, the applicable Administrator shall have the authority to (i) determine the
employees of the Company and Related Corporations (from among the class of
employees eligible under paragraph 1 to receive ISOs) to whom ISOs may be
granted and to determine (from among the class of individuals and entities
eligible under paragraph 1 to receive Non-Qualified Options, Awards, SARs and
Units and to make Purchases) to whom Non-Qualified Options, Awards, SARs, Units
and authorizations to make Purchases may be granted; (ii) determine the time or
times at which Options, Awards, SARs or Units may be granted or Purchases made;
(iii) determine the option price of shares subject to each Option (subject to
the requirements of paragraph 4 with respect to ISOs and paragraph 5 with
respect to Non-Qualified Options); (iv) determine the purchase price of shares
subject to each Purchase; (v) determine whether each Option granted shall be an
ISO or a Non-Qualified Option; (vi) determine the time or times when each Option
shall become exercisable and the duration of the exercise period (subject to
paragraph 4 with respect to ISOs and paragraph 5 with respect to Non-Qualified
Options); (vii) determine whether restrictions such as repurchase options are to
be imposed on shares subject to Stock Rights and the nature of such
restrictions, if any; and (viii) interpret the Plan and prescribe and rescind
rules and regulations relating to it; however, neither the Board nor the
applicable Administrator shall have any authority to determine whether or when
an outside director shall receive or exercise Outside Directors' Options (or to
determine the exercise price of such Outside Directors' Options) other than to
ensure compliance with the terms of the Plan
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<PAGE> 17
with respect to Outside Directors' Options. The interpretation and construction
by the applicable Administrator of any provisions of the Plan or of any Stock
Right granted under it shall be final unless otherwise determined by the Board.
Administrators or the Board may from time to time adopt such rules and
regulations for carrying out the Plan as they may deem best. No member of the
Board, any Administrator nor the Company shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
3. Stock. The stock subject to the Stock Rights shall be authorized but unissued
shares of the Company's Common Stock, par value $.001 per share (the "Common
Stock"), or shares of Common Stock reacquired by the Company in any manner. The
aggregate number of shares of Common Stock which may be issued pursuant to the
Plan is 444,000; provided, however, that in no event shall the number of shares
of Common Stock subject to, and issued upon the exercise of, ISOs exceed 444,000
in the aggregate; provided, further, that the aggregate number of shares of
Common Stock subject to, and issuable or issued under, the Plan and the
Company's 1994 Non-Qualified Stock Option Plan shall not exceed 444,000; and
provided, further, that the maximum number of shares of Common Stock issuable
under the Plan to any employee of the Company in any calendar year shall not
exceed 444,000, less the aggregate number of shares of Common Stock issuable or
issued under the Plan and the Company's 1994 Non-Qualified Stock Option Plan.
The number of shares authorized for the grant of Stock Rights under the Plan
shall be subject to adjustment as provided in paragraph 10. If any Option or any
other Stock Right granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to be
exercisable in whole or in part, or if the Company shall reacquire any shares
issued pursuant to any Stock Right, either as a result of forfeiture or delivery
to the Company as part or full payment for the exercise of an Option, the
unpurchased shares subject to such Options or Stock Rights and any shares so
reacquired by or delivered to the Company shall again be available for grants of
Stock Rights under the Plan.
4. ISO Provisions. Any of the following provisions shall have no force or effect
if its inclusion in the Plan is not necessary for Options issued as ISOs to
qualify as ISOs pursuant to the Code and the regulations issued thereunder.
A. Grant of ISO. All ISOs shall be granted under the Plan within ten
(10) years of the date of the Plan's adoption by the Board or the date the Plan
receives the requisite shareholder approval, whichever is earlier.
B. Minimum Option Price for ISOs. (i) The price per share specified in
the agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant. In
the case of an ISO to be granted to an employee owning stock representing more
than ten percent of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than 110 percent of the fair
market value per share of Common Stock on the date of grant. (ii) In no event
shall the aggregate fair market value (determined at the time an ISO is granted)
of Common Stock for which ISOs granted to any employee are exercisable for the
first time by such employee during any calendar year (under all stock option
plans of the Company and any Related Corporation) exceed $100,000. (iii) If, at
the time an ISO is granted under the Plan, the Company's Common Stock is
publicly traded, "fair market value" shall be determined as of the last business
day for which the prices or quotes discussed in this sentence are available
prior to the date such Option is granted and shall mean (a) the last reported
sales price of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (b) the last reported sale price (on that date)
of the Common Stock on the NASDAQ National Market List, if the Common Stock is
not then traded on a national securities exchange; or (c) the closing bid price
(or the average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ National Market List. However, if the Common Stock is not
publicly traded at the time an ISO is granted under the Plan, "fair market
value" shall be deemed to be the fair market value of the Common Stock as
determined by the applicable Administrator after taking into consideration all
factors which it deems appropriate, including, without limitation, recent sale
and offer prices of the Common Stock in private transactions negotiated at arm's
length.
C. Duration of ISOs. Subject to earlier termination as provided in
subparagraphs F and G hereunder, each ISO shall expire on the date specified by
the applicable Administrator, but not more than (i) ten years from the date of
grant in the case of ISOs generally, and (ii) five years from the date of grant
in the case of ISOs granted to an employee owning stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any Related Corporation. Subject to the foregoing provisions and such
earlier termination as provided in said subparagraphs E and F, the term of each
ISO shall be the term set forth in the original instrument
14
<PAGE> 18
granting such ISO, except with respect to any part of such ISO that is converted
into a Non-Qualified Option pursuant to subparagraph K below.
D. Eligible Employees. ISOs may be granted to any employee of the
Company or any Related Corporation. Those officers and directors of the Company
who are not employees may not be granted ISOs under the Plan.
E. Acceleration of Exercise of ISOs. The Administrator shall not,
without the consent of the Optionee, accelerate the exercise date of any
installment of any ISO granted to any employee (and not previously converted
into a Non-Qualified Option pursuant to subparagraph K below) if such
acceleration would violate the annual vesting limitation contained in Section
422A(d) of the Code, as described in subparagraph B(ii) hereinabove.
F. Effect of Termination of Employment on ISOs. If an ISO Optionee
ceases to be employed by the Company or any Related Corporation other than by
reason of death or disability (as such term is defined in subparagraph I
hereunder), any ISO granted to such Optionee within the six-month period
immediately preceding such termination shall be cancelled forthwith. With
respect to any ISOs granted to such Optionee more than six months prior to such
termination, no further installments of such ISOs shall become exercisable and
his ISOs shall terminate after the passage of 60 days from the date of
termination of his employment, but in no event later than on their specified
expiration dates, except to the extent that such ISOs (or unexercised
installments thereof) have been converted into Non-Qualified Options pursuant to
subparagraph K below. Leave of absence with the written approval of the
applicable Administrator shall not be considered an interruption of employment
under the Plan, provided that such written approval contractually obligates the
Company or any Related Corporation to continue the employment of the employee
after the approved period of absence. Employment shall also be considered as
continuing uninterrupted during any other bona fide leave of absence (such as
those attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed 90 days or, if longer,
any period during which such Optionee's right to reemployment is guaranteed by
statute. ISOs granted under the Plan shall not be affected by any change of
employment within or among the Company and Related Corporations, so long as the
Optionee continues to be an employee of the Company or any Related Corporation.
G. Effect of Death or Disability on ISOs. If an Optionee ceases to be
employed by the Company or any Related Corporation by reason of his death, any
ISO of his may be exercised, to the extent of the number of shares with respect
to which he could have exercised it on the date of his death, by his estate,
personal representative or beneficiary who has acquired the ISO by will or by
the laws of descent and distribution, at any time prior to the earlier of the
date specified in the ISO agreement, the ISO's specified expiration date or one
year of the death of the Optionee. If an Optionee ceases to be employed by the
Company and all Related Corporations by reason of his disability, he shall have
the right to exercise any ISO held by him on the date of termination of
employment, to the extent of the number of shares with respect to which he could
have exercised it on that date, at any time prior to the earlier of the date
specified in the ISO agreement, the ISO's specified expiration date or one year
from the date of the termination of the Optionee's employment. For the purposes
of the Plan, the term "disability" shall mean "permanent and total disability"
as defined in Section 22(e)(3) of the Code or successor statute.
H. Adjustments. Any adjustment made pursuant to paragraphs 10(A) or (B)
with respect to ISOs shall be made only after the applicable Administrator,
after consulting with counsel for the Company, determines whether such
adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425 of the Code) or would cause any adverse tax consequences
for the holders of such ISOs. If the applicable Administrator determines that
such adjustments made with respect to ISOs would constitute a modification of
such ISOs, it may refrain from making such adjustments.
I. Notice to Company of Disqualifying Dispositions. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a "disqualifying disposition" of any Common Stock acquired
pursuant to the exercise of an ISO. A "disqualifying disposition" is any
disposition (including any sale) of such Common Stock before the later of (a)
two years after the date the employee was granted the ISO, or (b) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
J. Other Requirements. ISOs shall be issued subject to such additional
requirements as may be imposed from time to time by the Code or the regulations
issued thereunder.
K. Conversion of ISOs into Non-Qualified Options; Termination of ISOs.
The applicable Administrator, at the written request of any Optionee, may in its
discretion take such actions as may be necessary to convert such Optionee's ISOs
(or any installments or portions of installments thereof) that have not been
exercised on the date of
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<PAGE> 19
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Optionee is an employee of the Company or a
Related Corporation at the time of such conversion. Such actions may include,
but not be limited to, extending the exercise period or reducing the exercise
price of the appropriate installments of such Options. At the time of such
conversion, the applicable Administrator (with the consent of the Optionee) may
impose such conditions on the exercise of the resulting Non-Qualified Options as
the applicable Administrator in its discretion may determine, provided that such
conditions shall not be inconsistent with the provisions of paragraph 5 or any
other paragraph of the Plan. Nothing in the Plan shall be deemed to give any
Optionee the right to have such Optionee's ISOs converted into Non-Qualified
Options, and no such conversion shall occur until and unless the Administrator
takes appropriate action. The applicable Administrator, with the consent of the
Optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
5. Non-Qualified Options.
A. Minimum Option Price. The price per share specified in the agreement
relating to each Non-Qualified Option granted under the Plan shall not be less
than the fair market value per share of Common Stock on the date of such grant.
If, at the time a Non-Qualified Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Non-Qualified Option is granted and shall
mean (i) the last reported sales price of the Common Stock on the principal
national securities exchange on which the Common Stock is traded, if the Common
Stock is then traded on a national securities exchange; or (ii) the last
reported sale price (on that date) of the Common Stock on the NASDAQ National
Market List, if the Common Stock is not then traded on a national securities
exchange; or (iii) the closing bid price (or the average of bid prices) last
quoted (on that date) by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the NASDAQ National Market
List. However, if the Common Stock is not publicly traded at the time a
Non-Qualified Option is granted under the Plan, "fair market value" shall be
deemed to be the fair market value of the Common Stock as determined by the
applicable Administrator after taking into consideration all factors which it
deems appropriate, including, without limitation, recent sale and offer prices
of the Common Stock in private transactions negotiated at arm's length.
B. Duration of Non-Qualified Options. Each Non-Qualified Option shall
expire on the date specified by the applicable Administrator, but not more than
ten (10) years from the date of grant.
C. Vesting of Non-Qualified Options. Subject to any longer or shorter
vesting periods and any termination provisions which the applicable
Administrator may impose, a Non-Qualified Option shall be exercisable as
follows: (i) 20% of the shares under the Non-Qualified Option shall be
exercisable one calendar year after the date of its grant, (ii) an additional
20% of the shares under the Non-Qualified Option shall be exercisable two
calendar years after the date of its grant, (iii) an additional 20% of the
shares under the Non-Qualified Option shall be exercisable three calendar years
after the date of its grant, (iv) an additional 20% of the shares under the
Non-Qualified Option shall be exercisable four calendar years after the date of
its grant, and (v) the last 20% of the shares under the Non-Qualified Option
shall be exercisable five calendar years after the date of its grant.
D. Maintain Non-ISO Status. If the applicable Administrator determines
to issue a Non-Qualified Option, it shall take whatever actions it deems
necessary, under Section 422A of the Code and the regulations promulgated
thereunder, to ensure that such Non-Qualified Option is not treated as an ISO.
6. Stock Appreciation Rights. At the discretion of the applicable Administrator,
Options granted under this Plan may be granted in tandem with SARs ("tandem
SARS"), or SARs may be granted independently of and not in tandem with any
Option ("naked SARs"). SARs will become exercisable at such time or times, and
on such conditions, as the applicable Administrator may specify; the applicable
Administrator may impose conditions upon the grant or exercise of any SAR, which
conditions may include a condition that the SAR may only be exercised in
accordance with rules and regulations adopted by the applicable Administrator
from time to time. Such rules and regulations may govern the right to exercise
the SAR granted prior to the adoption or amendment of such rules and regulations
as well as SAR rights granted thereafter.
A. Tandem SARs. (i) Any tandem SAR granted with an ISO may be granted
only at the date of grant of such ISO. Any tandem SAR granted with a
Non-Qualified Option may be granted either at or after the time such Option is
granted. A tandem SAR is the right of an Optionee, without payment to the
Company (except for applicable withholding taxes), to receive the excess of the
fair market value (as defined in subparagraph 4(B)(iii)) per share on the date
on which such SAR is exercised over the option price per share as provided in
the relating underlying Option. A tandem SAR granted with an ISO may be
exercised only when the fair market value (as defined in subparagraph 4(B)(iii))
16
<PAGE> 20
per share of the Common Stock subject to the ISO exceeds the per share exercise
price of the ISO. A tandem SAR granted with an Option shall pertain to, and be
granted only in conjunction with, the related underlying Option granted under
this Plan and shall be exercisable and exercised only to the extent that the
underlying Option is exercisable. The number of shares of Common Stock subject
to such tandem SAR shall be all or part of the shares subject to such Option as
determined by the applicable Administrator. The tandem SAR shall either become
fully or partially non-exercisable and shall then be fully or partially
forfeited if the exercisable portion, or any part thereof, of the underlying
Option is exercised and vice versa. (ii) Subject to any restrictions or
conditions imposed by the applicable Administrator, a tandem SAR may be
exercised by the Optionee as to a number of shares of Common Stock under its
related Option only upon the surrender of the then-exercisable portion of the
related Option covering a like number of shares of Common Stock. Upon the
exercise of a tandem SAR and the surrender of the exercisable portion of the
related Option, the Optionee shall be awarded cash, shares of Common Stock or a
combination of shares and cash at the discretion of the applicable
Administrator. The award shall have a total value equal to the product obtained
by multiplying (1) the excess of the fair market value per share on the date on
which such tandem SAR is exercised over the Option price per share by (2) the
number of shares subject to the exercisable portion of the related Option so
surrendered.
B. Naked SARs. (i) A naked SAR may be granted irrespective of whether
the recipient holds, is being granted, or has been granted any options under any
stock plan of the Company. A naked SAR may be granted irrespective of whether
the recipient holds, is being granted, or has been granted any tandem SARs. A
naked SAR may be made exercisable without regard to the exercisability of any
option. (ii) With respect to the exercise of any naked SAR, the term "Spread" as
used in this paragraph 6 shall mean an amount equal to the product computed by
multiplying (1) the excess of (A) the fair market value per share of Common
Stock of the Company on the date such naked SAR is exercised over (B) the price
designated by the applicable Administrator (the "Award Price") by (2) the number
of shares with respect to which such naked SAR is being exercised.
C. General Provisions. (i) The applicable Administrator may specify
that a SAR shall be exercisable for cash, for shares, for a combination of cash
or shares, or in cash or shares at the holder's option. On the exercise of a
SAR, the holder thereof, except as provided in subparagraphs (ii) and (iii) of
this paragraph 6(C), shall be entitled to receive either: (a) if the exercise is
for shares, a number of shares equal to the quotient computed by dividing the
Spread by the fair market value per share on the date of exercise of the SAR,
provided, however, that in lieu of fractional shares the Company shall pay cash
equal to the same fraction of the fair market value per share on the date of
exercise of the SAR; or (b) if the exercise is for cash, an amount in cash equal
to the Spread; or (c) if the exercise is partly for cash and partly for shares,
a combination of cash in the amount specified in such SAR holder's notice of
exercise, and a number of shares calculated as provided in clause (a) of this
subparagraph (i), after reducing the Spread by such cash amount, plus cash in
lieu of any fractional share as provided above. (ii)Notwithstanding the
provisions of subparagraph (i) of this paragraph 6(C), the applicable
Administrator shall have sole discretion to consent to or disapprove, in whole
or in part, any permitted election or the right without election of a holder of
a SAR to receive cash upon the exercise of a SAR ("Cash Election"). Such consent
or disapproval may be given at any time after the Cash Election to which it
relates. If the applicable Administrator shall disapprove a Cash Election, in
lieu of paying the cash (or any portion thereof) specified in such Cash
Election, the Administrator shall determine the amount of cash, if any, to be
paid pursuant to such Cash Election and shall issue a number of shares
calculated as provided in clause (a) of subparagraph (i) of this paragraph 6(C),
after reducing the Spread by such cash to be paid plus cash in lieu of any
fractional share. (iii) SARs granted or to be granted to officers or directors
of the Company under the Plan shall be subject to the following additional
provisions: (a) no grant shall be made unless and until the Company has been
subject to the reporting requirements of Section 13(a) of the 1934 Act for at
least a year and has filed all reports and statements required to be filed
pursuant to such Section for that year; (b) a Cash Election may be made only
during the period beginning on the third business day following the date of
release for publication of the quarterly and annual summary statements of sales
and earnings of the Company and ending on the twelfth business day following
such date; and (c) no Cash Election may be made (and no related Option
exercised) during the six months after grant, except in the event of the death
or disability of the holder. The Company intends that this subparagraph (iii)
shall comply with the requirements of Rule 16b-3. Should any provision of this
subparagraph (iii) be unnecessary to comply with the requirements of the said
Rule 16b-3, the Board may amend this Plan to add to or modify the provisions of
this Plan accordingly. (iv) No SAR shall be transferable except by will or by
the laws of descent and distribution. During the
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<PAGE> 21
life of a holder of a SAR, the SAR shall be exercisable only by him or his
guardian or legal representative. (v) A person exercising a SAR for shares shall
not be treated as having become the registered owner of any shares issued on
such exercise until such shares are delivered to him. (vi) Each SAR shall be on
such terms and conditions (including additional terms and conditions) not
inconsistent with this Plan as the applicable Administrator may determine. (vii)
To exercise a SAR, the holder shall (i) give written notice thereof to the
Company addressed to the Secretary of the Company by delivery to the Company at
104 East Mann Road, Laredo, Texas 78042, and by specifying therein the amount he
elects (if such election is permitted under the terms of the SAR) to receive in
cash, if any, and the amount he elects (if such election is permitted under the
terms of the SAR) to receive in shares, and (ii) deliver to the Company such
written representations, warranties and covenants as may be required by the
Company or Company counsel. The date of exercise of a SAR shall be the date on
which the Company shall have received the notice referred to in the first
sentence of this subparagraph (vii). (viii) The number of shares awardable to an
Optionee with respect to the noncash portion of a SAR shall be determined by
dividing such noncash portion by the fair market value per share (as determined
in accordance with subparagraph 4(B)(iii)) on the exercise date. No fractional
shares shall be issued. Any fractional shares which, but for this subparagraph
(viii), would have been issued to an Optionee pursuant to a SAR, shall be deemed
to have been issued and immediately sold to the Company for their fair market
value, and the Optionee shall receive from the Company cash in lieu of such
fractional shares.
7. Units. At the discretion of the applicable Administrator, performance awards
in the form of Units may be granted either independently of or in tandem with a
Stock Right granted hereunder, to such extent as determined by the applicable
Administrator, except that such Units shall not be granted in tandem with ISOs
granted under the Plan. Units granted hereunder may be based on such factors as
changes in the market price for shares of Common Stock of the Company, personal
performance of the recipient of such Units or of his division or department, the
performance of the Related Corporation by which he is employed, or any other
factors or criteria set by the applicable Administrator. Units shall have such
other terms and conditions as the applicable Administrator shall determine and
shall be payable in such form as such Administrator may determine including, for
example, payment in shares of the Company's Common Stock.
8. Outside Directors' Options.
A. Grant. On March 1 of each calendar year commencing March 1, 1995,
each outside director then serving shall receive an option to purchase 7,000
shares of Common Stock (individually, an "Outside Director's Option," and
collectively, "Outside Directors' Options").
B. Minimum Purchase Price. The exercise price per share of the Outside
Directors' Options shall not be less than the fair market value per share of
Common Stock on the date of such grant. If, at the time an Outside Director's
Option is granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day for which
the prices or quotes discussed in this sentence are available prior to the date
such Outside Director's Option is granted and shall mean (i) the last reported
sales price of the Common Stock on the principal national securities exchange on
which the Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or (ii) the last reported sale price (on that
date) of the Common Stock on the NASDAQ National Market List, if the Common
Stock is not then traded on a national securities exchange; or (iii) the closing
bid price (or the average of bid prices) last quoted (on that date) by an
established quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market List. However, if the Common
Stock is not publicly traded at the time an Outside Director's Option is granted
under the Plan, "fair market value" shall be the average of the three most
recent sale and offer prices of the Common Stock in private transactions
negotiated at arm's length.
C. Duration of Outside Directors' Options. Each Outside Director's
Option shall expire seven (7) years from the date of grant; otherwise, an
Outside Director's Option shall not be subject to forfeiture or termination.
D. Exercise. An outside director may exercise an Outside Director's
Option, if exercisable, by providing written notice to the Company addressed to
the Secretary of the Company at the Company's corporate office. The written
notice shall specify the number of options being exercised, and by paying the
full exercise price. The written notice shall also include such written
representations, warranties and covenants as may be required by the Company,
Company counsel or the applicable Administrator.
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<PAGE> 22
E. Maintain Non-ISO Status. The applicable Administrator shall take
whatever actions it deems necessary, under Section 422A of the Code and the
regulations promulgated thereunder, to ensure that any such Outside Director's
Option is not treated as an ISO.
F. Termination. Upon the termination of the Plan or the unavailability
of shares of Common Stock for issuance under the Plan, no additional Outside
Directors' Options shall be granted.
9. Written Agreements. Stock Rights shall be evidenced by instruments (which
need not be identical) in such forms as the applicable Administrator may from
time to time approve. Such instruments shall conform to such terms, conditions
and provisions as are applicable hereunder and may contain such other terms and
conditions and provisions as the applicable Administrator deems advisable which
are not inconsistent with the Plan, including restrictions applicable to shares
of Common Stock issuable upon exercise of Stock Rights and the payment, if
applicable, of any legal form of consideration (including, without limitation,
whether payment must be in cash or by tendering shares of Common Stock). A Stock
Right may provide for acceleration of exercise in the event of a change in
control of the Company, in the discretion of and as defined by the applicable
Administrator. The applicable Administrator may from time to time confer
authority and responsibility on one or more of its own members and/or one or
more officers of the Company to execute and deliver such instruments. The proper
officers of the Company are authorized and directed to take any and all action
necessary or advisable from time to time to carry out the terms of such
instruments.
10. Adjustments. Upon the happening of any of the following described events, an
Optionee's rights with respect to Options granted to him hereunder, and the
recipient's rights with respect to Common Stock to be acquired (or used for
measurement purposes) pursuant to the exercise of SARs or Units, or to be
acquired pursuant to a Purchase or Award hereunder, shall be adjusted as
hereinafter provided, unless otherwise specifically provided, in addition or to
the contrary, in the written agreement between the recipient and the Company
relating to such Stock Right.
A. Certain Corporate Events. In the event shares of Common Stock shall
be subdivided or combined into a greater or smaller number of shares or if, upon
a merger, consolidation, reorganization, split-up, liquidation, combination,
recapitalization or the like of the Company, the shares of Common Stock shall be
exchanged for other securities of the Company or of another corporation, each
grantee of a Stock Right shall be entitled, subject to the conditions herein
stated, to purchase (or have used for measurement purposes) such number of
shares of Common Stock or amount of other securities of the Company or such
other corporation as were exchangeable for the number of shares of Common Stock
which such grantee would have been entitled to purchase (or have used for
measurement purposes) except for such action, and appropriate adjustments shall
be made in the purchase price per share to reflect such subdivision, combination
or exchange.
B. Stock Dividends. In the event the Company shall issue any of its
shares as a stock dividend upon or with respect to the shares of stock of the
class which at the time shall be subject to a Stock Right hereunder, each
grantee upon exercising a Stock Right shall be entitled to receive (for the
purchase price paid upon such exercise) (or have used for measurement purposes)
the shares or other consideration as to which he is exercising his Stock Right
and, in addition thereto (at no additional cost), such number of shares of the
class or classes in which such stock dividend or dividends were declared or
paid, and such amount of cash in lieu of fractional shares, or other
consideration as he would have received if he had been the holder of the shares
as to which he is exercising (or which are used for measurement in connection
with) his Stock Right at all times between the date of grant of such Stock Right
and the date of its exercise.
C. New Securities. If any person or entity owning restricted Common
Stock obtained by exercise of a Stock Right made hereunder receives new or
additional or different shares or securities ("New Securities") in connection
with a corporate transaction described in subparagraph A above or a stock
dividend described in subparagraph B above as a result of owning such restricted
Common Stock, such New Securities shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to which
such New Securities were issued.
D. Cash Dividends. No adjustments shall be made for dividends paid in
cash or in property other than securities of the Company, unless specified to
the contrary by the applicable Administrator in the instrument evidencing such
Stock Right.
E. Fractional Shares. No fractional shares shall actually be issued
under the Plan. Any fractional shares which, but for this subparagraph E, would
have been issued to a grantee pursuant to a Stock Right shall be deemed
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<PAGE> 23
to have been issued and immediately sold to the Company for their fair market
value, and the grantee shall receive from the Company cash in lieu of such
fractional shares.
F. Adjustments. Upon the happening of any of the foregoing events
described in subparagraphs A or B above, the class and aggregate number of
shares set forth in paragraph 3 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Board shall determine the specific adjustments to be made under this
paragraph 10 and, subject to paragraph 4(H), its determination shall be
conclusive.
11. Means of Exercising Stock Rights. A Stock Right (or any part or installment
thereof) shall be exercised as specified in the written instrument granting such
Stock Right, which instrument may specify any legal method of exercise and any
method of payment of the exercise price, including, without limitation, the
payment of the exercise price by tendering outstanding shares of Common Stock or
shares of Common Stock received upon exercise of a Stock Right. In the
discretion of the Administrator, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms. The holder of a Stock Right exercisable for shares
shall not have the rights of a shareholder with respect to the shares covered by
his Stock Right until the date of issuance of a stock certificate to him for
such shares. Except as expressly provided above in paragraph 10 with respect to
changes in capitalization and stock dividends, no adjustment shall be made for
dividends or similar rights for which the record date is before the date such
stock certificate is issued.
12. Transferability of Stock Rights. Except as otherwise provided in the Plan,
by the Administrator or in the written instrument granting the Stock Right, no
Stock Right granted under the Plan shall be transferrable by an Optionee other
than by (i) will or the laws of descent and distribution, or (ii) pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
13. Term of the Plan. This Plan was adopted by the Board on February 24, 1995,
subject to approval of the Plan by the holders of a majority of the outstanding
shares of the Company at the next meeting of shareholders present in person or
by proxy at the next meeting of shareholders. Stock Rights may be granted under
the Plan at any time after February 24, 1995, even if prior to the date of
shareholder approval of the Plan; provided, however, that such date shall not be
prior to the date on which the applicable Administrator acts to approve the
grant or award of such Stock Rights (other than Outside Directors' Options, the
grant of which are not subject to the applicable Administrator's approval). If
the requisite shareholder approval is not obtained by July 1, 1995, any grants
of ISOs under the Plan and any grants of Stock Rights (including Outside
Directors Options) to officers and directors, as the case may be, made prior to
that date will be automatically rescinded.
14. Termination; Amendment. The Board may terminate or amend the Plan in any
respect at any time, except that no amendment shall, without the approval of the
holders of a majority of the shares entitled to vote and that voted for or
against or expressly abstained with respect to the amendment of the Plan,
increase the total number of shares which may be issued under the Plan
15. Application of Funds. The cash proceeds, if any, received by the Company
from the sale of shares pursuant to Stock Rights authorized under the Plan shall
be used for general corporate purposes.
16. Governmental Regulation. The Company's obligation to sell and deliver shares
of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares. If the Company, in its sole discretion, shall determine
that it is necessary, to comply with applicable securities laws, the certificate
or certificates representing shares purchased pursuant to the exercise of a
Stock Right shall bear an appropriate legend in form and substance, as
determined by the Company, giving notice of applicable restrictions on transfer
under or with respect to such securities laws. The Company's obligation to
transfer or register the transfer or disposition of any shares of Common Stock
issued under the Plan is further subject to the Company's determination that
such transfer or disposition is in compliance with all applicable securities
laws.
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<PAGE> 24
17. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, an Outside Director's Option, the grant of an Award, the
making of a Purchase of Common Stock for less than its fair market value, the
making of a Disqualifying Disposition (as defined in paragraph 4(I)), the
vesting of restricted Common Stock acquired on the exercise of a Stock Right
hereunder, or any other event in connection with a Stock Right, the Company, in
accordance with Section 3402(a) of the Code, may require the Optionee, Award
recipient, purchaser, or holder or exerciser of a Stock Right to pay additional
withholding taxes in respect of the amount that is considered compensation
includable in such person's gross income.
18. Governing Law; Construction. The validity and construction of the Plan and
the instruments evidencing Stock Rights shall be governed by the laws of the
State of Texas. In construing this Plan, the singular shall include the plural
and the masculine gender shall include the feminine and neuter, unless the
context otherwise requires.
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<PAGE> 25
NATIONAL BANCSHARES CORPORATION OF TEXAS
104 EAST MANN ROAD
LAREDO, TEXAS 78042
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NATIONAL BANCSHARES CORPORATION OF TEXAS.
The undersigned acknowledges receipt of the Notice of Annual Meeting
of National Bancshares Corporation of Texas (the "Company") and hereby appoints
Jay H. Lustig and Marvin E. Melson, and each of them, the attorneys of the
undersigned, with power of substitution, for and in the name of the
undersigned, to vote as proxies for the undersigned according to the number of
shares of Common Stock the undersigned would be entitled to vote if then
personally present at the Annual Meeting of Shareholders of the Company to be
held May 29, 1998, or at any adjournment thereof, and to vote all shares of
Common Stock of the Company held by the undersigned and entitled to be voted
upon the following matters as indicated on the reverse side.
This Proxy may be revoked at any time prior to the voting thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR PROPOSALS NUMBER 1, NUMBER 2, NUMBER 3 AND NUMBER 4.
<PAGE> 26
NATIONAL BANCSHARES CORPORATION OF TEXAS
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. To vote the nominees for the Board of Directors. For All___
Withheld All___For All Except___
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE EXCEPTIONS BOX AND WRITE THAT NOMINEE'S NAME ON THE
SPACE PROVIDED BELOW.)
* EXCEPTIONS
---------------------------------------------------------
JAY H. LUSTIG, MARVIN E. MELSON, H. GARY BLANKENSHIP, JOHN W.
LETTUNICH, CHARLES T. MEEKS
2. To approve the amendment of the 1995 Stock Plan.
For___Against___Abstain___
3. To vote the appointment of Padgett, Stratemann & Co., L.L.P. as the
Company's auditors for the 1998 fiscal year.
For___Against___Abstain___
4. In their discretion, to vote upon such other business as may
properly come before the meeting or any adjournment thereof.
Address Change and/or Comments
----------------------------------------
----------------------------------------------------------------------
Dated ____________________________ 1998
Signature(s)
--------------------------------------
Signature(s)
--------------------------------------
Please sign exactly as your name appears to the
left. When shares are held by joint tenants, both
should sign. When signing as attorney, as
executor, administrator, trustee or guardian, give
full title as such. If a corporation, please sign
in full corporate name by President or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
