Exhibit 10.2
FIRST DEFIANCE FINANCIAL CORP.
1996 MANAGEMENT RECOGNITION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 First Defiance Financial Corp. (the "Corporation") hereby establishes
a Management Recognition Plan (the "Plan") and Trust (the "Trust") upon the
terms and conditions hereinafter stated in this 1996 Management Recognition Plan
and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold the Trust
assets existing on the date of this Agreement and all additions and accretions
thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of experience and
ability in key positions by providing Employees and Non-Employee Directors of
the Corporation and of First Federal Savings and Loan (the "Association") with a
proprietary interest in the Corporation as compensation for their contributions
to the Corporation, the Association, and any other Subsidiaries and as an
incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronouns shall
include the feminine pronouns and the singular shall include the plural.
3.01 "Association" means First Federal Savings and Loan, the wholly owned
subsidiary of the Corporation.
3.02 "Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.03 "Board" means the Board of Directors of the Corporation.
3.04 "Code" means the Internal Revenue Code of 1986, as amended.
3.05 "Committee" means the committee appointed by the Board pursuant to
Article IV hereof.
3.06 "Common Stock" means shares of the common stock, $0.01 par value per
share, of the Corporation.
3.07 "Disability" means any physical or mental impairment which qualifies
an Employee for disability benefits under the applicable long-term disability
plan maintained by the Corporation or any Subsidiary or, if no such plan
applies, which would qualify such Employee for disability benefits under the
Federal Social Security System.
3.08 "Effective Date" means the day upon which the holders of Common Stock
approve this Plan.
3.09 "Employee" means any person who is employed by the Corporation, the
Association, or any Subsidiary, or is an officer of the Corporation, the
Association, or any Subsidiary, including officers or other employees who may be
directors of the Corporation.
3.10 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
3.11 "Non-Employee Director" means a member of the Board who is not an
Employee.
3.12 "OTS" means the Office of Thrift Supervision.
3.13 "Plan Shares" or "Shares" means shares of Common Stock held in the
Trust which may be distributed to a Recipient pursuant to the Plan.
3.14 "Plan Share Award" or "Award" means a right granted under this Plan to
receive a distribution of Plan Shares upon completion of the service
requirements described in Article VII.
3.15 "Recipient" means an Employee or Non-Employee Director who receives a
Plan Share Award under the Plan.
3.16 "Subsidiary" means First Federal Savings and Loan and any other
subsidiaries of the Corporation or the Association which, with the consent of
the Board, agree to participate in this Plan.
3.17 "Trustee" means such firm, entity or persons nominated by the
Committee and approved by tile Board pursuant to Sections 4.01 and 4.02 to hold
legal title to the Plan for the purposes set forth herein.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall consist of two or more members of the Board, none
of whom shall be an officer or employee of the Corporation and each of whom
shall be a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. The Committee shall have all of the powers allocated to it in this
and other Sections of the Plan. Tile interpretation and construction by the
Committee of any provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Committee shall act by vote or written
consent of a majority of its members. Subject to the express provisions and
limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. The Committee
shall report its actions and decisions with respect to the Plan to the Board at
appropriate times, but in no event less than one time per calendar year. The
Committee shall recommend to the Board a firm or other entity to act as Trustee
in accordance with the provisions of this Plan and Trust and the terms of
Article VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee shall
be appointed or approved by, and will serve at the pleasure of, the Board. The
Board may in its discretion from time to time remove members from, or add
members to, the Committee, and may remove or replace the Trustee, provided that
any directors who are selected as members of the Committee shall not be officers
or employees of the Corporation and shall be "disinterested persons" within the
meaning of Rule 16b-3 promulgated under the Exchange Act.
4.03 Limitation on Liability. No member of the Board or the Committee shall
be liable for any determination made in good faith with respect to the Plan or
any Plan Shares or Plan Share Awards granted under it. If a member of the Board
or the Committee is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of anything done or not
done by him in such capacity under or with respect to the Plan, the Corporation
shall, subject to the requirements of applicable laws and regulations, indemnify
such member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and any Subsidiaries and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
4.04 Compliance with Laws and Regulations. All Awards granted hereunder
shall he subject to all applicable federal and state laws, rules and regulations
and to such approvals by any government or regulatory agency or stockholders as
may be required.
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ARTICLE V
CONTRIBUTIONS
5.01 Amount and Timing of Contributions. The Board shall determine the
amount (or the method of computing the amount) and timing of any contributions
by the Corporation and any Subsidiaries to the Trust established under this
Plan. Such amounts may be paid in cash or in shares of Common Stock and shall be
paid to the Trust at the designated time of contribution. No contributions by
Employees or Directors shall be permitted.
5.02 Investment of Trust Assets; Number of Plan Shares. Subject to Section
8.02 hereof, the Trustee shall invest all of the Trust's assets primarily in
Common Stock. The aggregate number of Plan Shares available for distribution
pursuant to this Plan shall be 259,076 shares of Common Stock, which shares
shall be purchased from the Corporation and/or from stockholders thereof by the
Trust with funds contributed by the Corporation. During the time this Plan
remains in effect, Awards to each Employee and each Non-Employee Director shall
not exceed 25% and 5% of the shares of Common Stock available under the Plan,
respectively. In addition, Awards to Non-Employee Directors in the aggregate
shall not exceed 30% of the shares of Common Stock available under the Plan.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Awards to Non-Employee Directors. Plan Share Awards equal to 7,772
shares shall be made to Non-Employee Directors: provided, however, that in no
case shall grants to Non-Employee Directors in the aggregate exceed 30% of the
shares of Common Stock available under the Plan.
(a) Initial Allocation. A Plan Share Award shall be allocated to each
Non-Employee Director as of the day on which the Plan is approved by
stockholders of the Corporation or, if a Non-Employee Director begins his
service on the Board following stockholder approval of the Plan, the day such
Non-Employee Director begins his service on the Board. Specifically, each
Non-Employee Director on such dates shall receive an initial Plan Share Award of
6,216 shares of Common Stock.
(b) Subsequent Allocation. A Plan Share Award shall be allocated to each
Non-Employee Director one year from the date on which his initial allocation is
made pursuant to Section 6.01(a) hereof and on the next anniversary date
thereafter. Specifically, each Non-Employee Director shall receive a Plan Share
Award for 778 shares of Common Stock on each of the two anniversary dates after
the initial allocation pursuant to Section 6.01(a) hereof.
6.02 Awards to Employees. Plan Share Awards may be made to such Employees
as may be selected by the Committee. In selecting those Employees to whom Plan
Share Awards may be granted and the number of Shares covered by such Awards, the
Committee shall consider the duties, responsibilities and performance of each
respective Employee, his present and
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potential contributions to the growth and success of the Corporation, his salary
and such other factors as the Committee shall deem relevant to accomplishing the
purposes of the Plan. The Committee may, but shall not be required to, request
the written recommendation of the Chief Executive Officer of the Corporation
regarding Plan Share Awards being considered by the Committee for any Employee
other than with respect to Plan Share Awards being considered for him.
6.03 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Sections 6.01 or 6.02 that a Plan Share Award is to be
issued, the Committee shall notify the Recipient in writing of the grant of the
Award, the number of Plan Shares covered by the Award, and the terms upon which
the Plan Shares subject to the Award shall be distributed to the Recipient. The
date on which the Committee so notifies the Recipient shall be considered the
date of grant of the Plan Share Award. The Committee shall maintain records as
to all grants of Plan Share Awards under the Plan.
6.04 Allocations Not Required to any Specific Employee. Notwithstanding
anything to the contrary in Section 6.02 hereof, no Employee shall have any
right or entitlement to receive a Plan Share Award hereunder, such Awards being
at the total discretion of the Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Subject to the terms hereof, Plan Share Awards shall be
earned by a Recipient at the rate of twenty percent (20%) of the aggregate
number of Shares covered by the Award as of each anniversary of the date of
grant of the Award. If the employment of an Employee is terminated for any
reason prior to the fifth (5th) anniversary of the date of grant of a Plan Share
Award (except as specifically provided in subsections (b) and (c) below), the
Recipient shall forfeit the right to any Shares subject to the Award which have
not theretofore been earned. In the event of a forfeiture of the right to any
Shares subject to an Award, such forfeited Shares shall become available for
allocation pursuant to Section 6.02 hereof as if no Award had been previously
granted with respect to such Shares. No fractional shares shall be distributed
pursuant to this Plan.
(b) Exception for Terminations Due to Death or Disability. Notwithstanding
the general rule contained in Section 7.01(a), all Plan Shares subject to a Plan
Share Award held by a Recipient whose employment or service with the Corporation
or any Subsidiary terminates due to death or Disability shall be deemed earned
as of the Recipient's last day of employment with the Corporation or any
Subsidiary and shall be distributed as soon as practicable thereafter; provided,
however, that Awards shall be distributed in accordance with Section 7.03(a).
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(c) Revocation for Misconduct. Notwithstanding anything hereinafter to the
contrary, the Board may by resolution immediately revoke, rescind and terminate
any Plan Share Award, or portion thereof, previously awarded under this Plan, to
the extent Plan Shares have not been distributed hereunder to the Recipient,
whether or not yet earned, in the case of an Employee who is discharged from the
employ of the Corporation or any Subsidiary for cause (as hereinafter defined).
Termination for cause shall mean termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order. Plan Share Awards granted to a
Non-Employee Director who is removed for cause pursuant to the Corporation's
Articles of Incorporation shall terminate as of the effective date of such
removal.
7.02 Distribution of Dividends. Any cash dividends or stock dividends
declared in respect of each unvested Plan Share Award will be held by the Trust
for the benefit of the Recipient on whose behalf such Plan Share Award is then
held by the Trust and such dividends, including any interest thereon, will be
paid out proportionately by the Trust to the Recipient thereof as soon as
practicable after the Plan Share Awards become earned. Any cash dividends or
stock dividends declared in respect of each vested Plan Share held by the Trust
will be paid by the Trust, as soon as practicable after the Trust's receipt
thereof, to the Recipient on whose behalf such Plan Share is then held by the
Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Plan Shares shall be distributed
to the Recipient or his Beneficiary, as the case may be, as soon as practicable
after they have been earned, provided, however, that no Plan Shares shall be
distributed to the Recipient or Beneficiary pursuant to a Plan Share Award
within six months from the date on which that Plan Share Award was granted to
such person.
(b) Form of Distributions. All Plan Shares, together with any Shares
representing stock dividends, shall be distributed in the form of Common Stock.
One share of common Stock shall be given for each Plan Share earned and
distributable. Payments representing cash dividends shall be made in cash.
(c) Withholding. The Trustee may withhold from any cash payment or common
Stock distribution made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes, and if the amount of a cash payment
is insufficient, the Trustee may require the Recipient or Beneficiary to pay to
the Trustee the amount required withheld as a condition of delivering the Plan
Shares. The Trustee shall pay over to Corporation or any Subsidiary which
employs or employed such Recipient any such amount withheld from or paid by tile
Recipient or Beneficiary.
(d) Restrictions on Selling of Plan Shares. Plan Share Awards may not be
assigned, pledged or otherwise disposed of prior to the time that they are
earned and distributed pursuant to the terms of this Plan. Following
distribution, the Committee may require the
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Recipient or his Beneficiary, as the case may be, to agree not to sell or
otherwise dispose of his distributed Plan Shares except in accordance with all
then cable Federal and state securities laws, and the Committee may cause a
legend to be placed on the stock certificate(s) representing the distributed
Plan Shares in order to restrict transfer of tile distributed Plan Shares for
such period of time or under such circumstances as the Committee, upon the
advice of counsel, may deem appropriate.
7.04 Voting of Plan Shares. All Plan Shares which have not yet been earned
and allocated shall be voted by the Trustee in its sole discretion.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan Trust and the applicable directions, rules, regulations, procedures
and policies published by the Committee pursuant to the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that the
Trustee have complete authority and discretion with respect to the arrangement,
control and statement of the Trust, and that the Trustee shall invest all assets
of the Trust in Common Stock to the fullest extent practicable, except to the
extent that the Trustee determine that the holding of monies in cash or cash
equivalents is necessary to meet the obligations of the Trust. In performing
their duties, the Trustee shall have the power to do all things and execute such
instruments as may be deemed necessary or proper, including the following
powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force limiting
investments for trustees or other fiduciaries. The investment authorized herein
may constitute tile only investment of the Trust, and in making such investment,
the Trustee are authorized to purchase Common Stock from the Corporation or from
any other source, and such Common Stock so purchased may be outstanding, newly
issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in accordance with
(a) above, in such deposit accounts, and certificates of deposit, obligations of
the United States Government or its agencies or such other investments as shall
he considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any time held
or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in the name
of a nominee, without the addition of words indicating that such security is an
asset of the Trust (but accurate records shall be maintained showing that such
security is an asset of the Trust).
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(e) To hold cash without interest in such amounts as may in the opinion of
the Trustee be reasonable for the proper operation of the Plan and Trust.
(f) To employ brokers, agents, custodians, consultants and accountants.
(g) To hire counsel to render advice with respect to their rights, duties
and obligations hereunder, and such other legal services or representation as
they may deem desirable.
(h) To hold funds and securities representing the amounts to be distributed
to a Recipient or his Beneficiary as a consequence of a dispute as to the
disposition thereof, whether in a segregated account or held in common with
other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 Expenses. All costs and expenses incurred in the operation and
administration of this Plan shall be borne by the Corporation.
8.05 Indemnification. Subject to the requirements of applicable laws and
regulations, the Corporation shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of their duties
hereunder, unless the same shall be due to their gross negligence or willful
misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan Shares
available for distribution pursuant to the Plan Share Awards and the number of
Shares to which any Plan Share Award relates shall be proportionately adjusted
for any increase or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the effective date of the Plan resulting from any
split, subdivision or consolidation of shares or other capital adjustment, or
other increase or decrease in such shares effected without receipt or payment of
consideration by the Corporation.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate tile Plan, subject to regulations of the OTS and any
required stockholder
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approval or any stockholder approval which the Board may deem to be advisable
for any reason, such as for the purpose of obtaining or retaining any statutory
or regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. The Board may not, without the
consent of the Recipient, alter or impair his Plan Share Award except as
specifically authorized herein. Upon termination of the Plan, the Recipient's
Plan Share Awards shall be distributed to the Recipient in accordance with the
terms of Article VII hereof. Notwithstanding anything contained in this Plan to
the contrary, the provisions of Articles VI and VII of this Plan shall not be
amended more than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations promulgated under such statutes.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall not
be transferable by a Recipient, and during the lifetime of the Recipient, Plan
Shares may only be earned by and paid to a Recipient who was notified in writing
of an Award by the Committee pursuant to Section 6.03. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Corporation or any Subsidiary be subject to any claim for benefits
hereunder.
9.04 Employment or Service Rights. Neither the Plan nor any grant of a Plan
Share Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee or Non-Employee Director to continue in such capacity.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually earned and
distributed to him.
9.06 Governing Law. To the extent not governed by Federal law, the Plan and
Trust shall be governed by the laws of the State of Ohio.
9.07 Effective Date. This Plan shall be effective as of the Effective Date,
and Awards may be granted hereunder as of or after the Effective Date and as
long as the Plan remains in effect. Notwithstanding the foregoing or anything to
the contrary in this Plan, the implementation of this Plan and any Awards
granted pursuant hereto are subject to the non-objection of the OTS and approval
of the Corporation's stockholders.
9.08 Term of Plan. This Plan shall remain in effect until the earlier of
(1) ten (10) years from the Effective Date, (2) termination by the Board, or (3)
the distribution to Recipients and Beneficiaries of all assets of the Trust.
9.09 Tax Status of Trust. It is intended that the trust established hereby
be treated as a Grantor Trust of the Corporation under the provisions of Section
671 et seq. of the Code, as the same may be amended from time to time. 3/20/02 -
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