EXHIBIT 10.2
EAST TEXAS FINANCIAL SERVICES, INC.
RECOGNITION AND RETENTION PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining executive employees and directors of the Corporation
and its Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Award" - means the grant of Restricted Stock by the
Committee, as provided in the Plan.
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Association" - means First Federal Savings and Loan
Association, a savings institution and its predecessors and successors.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 7
hereof.
"Continuous Service" - means the absence of any interruption
or termination of service as a director, advisory director, director emeritus,
executive officer or employee of the Corporation or any Affiliate. Service shall
not be considered interrupted in the case of sick leave, military leave or any
other leave of absence approved by the Corporation or any Affiliate or in the
case of transfers between payroll locations of the Corporation or between the
Corporation, its subsidiaries or its successor. With respect to any advisory
director or director emeritus, continuous service shall mean availability to
perform such functions as may be required of the Association's advisory
directors or directors emeritus, respectively.
"Corporation" - means East Texas Financial Services, Inc., a
Delaware corporation.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
"Non-Employee Director" - means a director who a) is not
currently an officer or employee of the Corporation; b) is not a former employee
of the Corporation who receives compensation for prior services (other than from
a tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"OTS" - means the Office of Thrift Supervision.
"OTS Regulations" - means the rules and regulations of the
OTS.
"Participant" - means any director, advisory director,
director emeritus, executive officer or employee of the Corporation or any
Affiliate who is selected by the Committee to receive an Award.
"Plan" - means the Recognition and Retention Plan of the
Corporation.
"Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 3 hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions referred
to in Section 3 hereof, so long as such restrictions are in effect.
"Shares" - means the common stock, par value $0.01 per share,
of the Corporation.
3. Terms and Conditions of Restricted Stock. The Committee shall have
full and complete authority, subject to the limitations of the Plan and OTS
Regulations, to grant awards of Restricted Stock and, in addition to the terms
and conditions contained in paragraphs (a) through (f) of this Section 3, to
provide such other terms and conditions (which need not be identical among
Participants) in respect of such Awards, and the vesting thereof, as the
Committee shall determine.
(a) At the time of an award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period, during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares awarded as
Restricted Stock shall vest, and subject to any such other terms and conditions
as the Committee shall provide, shares of Restricted Stock may not be sold,
assigned, transferred, pledged, voted or otherwise encumbered by the
Participant, except as hereinafter provided, during the Restricted Period.
Except for such restrictions, and subject to paragraphs (c) and (e) of this
Section 3 and Section 4 hereof, the Participant as owner of such shares shall
have all the rights of a stockholder.
No director who is not an employee of the Corporation shall be
granted Awards with respect to more than 5% of the total shares subject to the
Plan. All non-employee directors of the Corporation, in the aggregate, may not
be granted Awards with respect to more than 30% of the total shares subject to
the Plan and no individual shall be granted Awards with respect to more than 25%
of the total shares subject to the Plan. No Awards shall begin vesting earlier
than one year from the date the Plan is approved by stockholders of the
Corporation and shall not vest at a rate in excess of 20% per year, beginning
from the date of grant. In the event OTS Regulations are amended (the "Amended
Regulations") to permit shorter vesting periods, any Award made pursuant to this
Plan, which Award is subject to the requirements of such Amended Regulations,
may vest, at the sole discretion of the Committee, in accordance with such
Amended Regulations.
Subject to compliance with OTS Regulations, the Committee
shall have the authority, in its discretion, to accelerate the time at which any
or all of the restrictions shall lapse with respect thereto, or to remove any or
all of such restrictions, whenever it may determine that such action is
appropriate by reason of changes in applicable tax or other laws or other
changes in circumstances occurring after the commencement of such Restricted
Period.
(b) Except as provided in Section 5 hereof, if a Participant
ceases to maintain Continuous Service for any reason (other than death or
disability), unless the Committee shall otherwise determine, all Shares of
Restricted Stock theretofore awarded to such Participant and which at the time
of such termination of Continuous Service are subject to the restrictions
imposed by paragraph (a) of this Section 3 shall upon such termination of
Continuous Service be forfeited and returned to the Corporation. If a
Participant ceases to maintain Continuous Service by reason of death or
disability, Restricted Stock then still subject to restrictions imposed by
paragraph (a) of this Section 3 will be free of those restrictions in proportion
to the portion of the restricted period which shall have elapsed at the time of
such termination of Continuous Service.
(c) Each certificate in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Recognition and Retention Plan
of East Texas Financial Services, Inc. Copies of such Plan are on file
in the offices of the Secretary of East Texas Financial Services, Inc.,
1200 S. Beckham Avenue, Tyler, Texas 75701-3319."
(d) At the time of any Award, the Participant shall enter into
an Agreement with the Corporation in a form specified by the Committee, agreeing
to the terms and conditions of the Award and such other matters as the
Committee, in its sole discretion, shall determine (the "Restricted Stock
Agreement").
(e) At the time of an award of shares of Restricted Stock, the
Committee shall determine that the payment to the Participant of dividends
declared or paid on such shares by the Corporation shall be deferred until the
lapsing of the restrictions imposed under paragraph (a) of this Section 3, and
shall be held by the Corporation for the account of the Participant until such
time. There shall be credited at the end of each year (or portion thereof)
interest at a market rate per annum on the amount of the account at the
beginning of the year. Payment of deferred dividends to the Participant,
together with interest accrued thereon, shall be made upon the earlier to occur
of the lapsing of the restrictions imposed under paragraph (a) of this Section 3
or upon death or disability of the Participant.
(f) At the expiration of the restrictions imposed by paragraph
(a) of this Section 3, the Corporation shall redeliver to the Participant (or
where the relevant provision of paragraph (b) of this Section 3 applies in the
case of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to paragraph
(c) of this Section 3 and the Shares represented by such certificate(s) shall be
free of the restrictions referred to in paragraph (a) of this Section 3.
4. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Corporation in the manner
provided in Section 3 hereof.
5. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 5 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of Shares of the Corporation with respect to which 25% or more of the
total number of votes which may be cast for the election of the Board of
Directors of the Corporation, (ii) as a result of, or in connection with, any
cash tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of the Corporation shall cease to constitute a majority of the
Board of Directors of the Corporation, or (iii) the stockholders of the
Corporation shall approve an agreement providing either for a transaction in
which the Corporation will cease to be an independent publicly owned entity or
for a sale or other disposition of all or substantially all the assets of the
Corporation or the Association. If the Continuous Service of any Participant of
the Corporation is involuntarily terminated for any reason other than cause, at
any time within 12 months after a change in control, unless the Committee shall
have otherwise provided, any Restricted Period with respect to Restricted Stock
theretofore awarded to such Participant shall lapse upon such termination and
all Shares awarded as Restricted Stock shall become fully vested in the
Participant to whom such Shares were awarded.
6. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of ERISA or
the rules thereunder.
7. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion,
subject to OTS Regulations, to (i) select Participants and grant Awards; (ii)
determine the number of shares to be subject to types of Awards generally, as
well as to individual Awards granted under the Plan; (iii) determine the terms
and conditions upon which Awards shall be granted under the Plan; (iv) prescribe
the form and terms of instruments evidencing such grants; and (v) establish from
time to time regulations for the administration of the Plan, interpret the Plan,
and make all determinations deemed necessary or advisable for the administration
of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
8. Shares Subject to Plan. Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 48,608 shares, subject to the Association's capital
level meeting OTS regulatory requirements at the time of submission to
stockholders. The shares with respect to which Awards may be made under the Plan
may be either authorized and unissued shares or issued shares heretofore or
hereafter reacquired and held as treasury shares. An Award shall not be
considered to have been made under the Plan with respect to Restricted Stock
which is forfeited and new Awards may be granted under the Plan with respect to
the number of Shares as to which such forfeiture has occurred.
9. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the
Corporation, the Association or any Affiliate.
10. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such shares in taxable
income), the Corporation shall have the right, in its sole discretion, to
withhold from any payment or distribution made under this Plan sufficient Shares
or withhold sufficient cash to cover any applicable withholding and employment
taxes. The Corporation shall have the right to deduct from all dividends paid
with respect to shares of Restricted Stock the amount of any taxes which the
Corporation is required to withhold with respect to such dividend payments. No
discretion or choice shall be conferred upon any Participant with respect to the
form, timing or method of any such tax withholding.
11. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time,
subject to OTS Regulations, but (except as provided in Section 4 hereof) no
amendment shall be made without approval of the stockholders of the Corporation
which shall (i) materially increase the aggregate number of Shares with respect
to which Awards may be made under the Plan, (ii) materially increase the
aggregate number of Shares which may be subject to Awards or (iii) change the
class of persons eligible to participate in the Plan; provided, however, that no
such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
12. Term of Plan. The Plan shall become effective upon its approval by
the stockholders of the Corporation. It shall continue in effect for a term of
ten years unless sooner terminated under Section 11 hereof.
13. Initial Grants. By, and simultaneously with, the approval of this
Plan by the stockholders of the Corporation, each member of the Board of
Directors of the Corporation who is not a full-time Employee, is hereby granted
an Award of 2,066 Shares. Each Award shall be evidenced by a Restricted Stock
Agreement in a form approved by the Board of Directors and shall be subject in
all respects to the terms and conditions of this Plan, which are controlling.
Each of the Awards granted hereunder shall vest in five equal annual
installments, with the first installment vesting on the one-year anniversary of
the date of grant. Awards granted pursuant to this Section 13 are subject to the
conditions of the Plan, including the requirement that the Director maintain
Continuous Service with the Association from the date of grant, provided that no
Awards shall be earned in any fiscal year in which the Association fails to meet
all of its fully phased-in capital requirements.