Exhibit 10.2
NORTH ARKANSAS BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each
member of the Committee hereby accepts his or her appointment hereunder upon the
terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past contributions to the
Bank, and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Bank" means Newport Federal Savings Bank.
3.03 "Beneficiary" means the person or persons designated by a
Participant to receive any benefits payable under the Plan in the event of such
Participant'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 Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee
appointed by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means North Arkansas Bancshares, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption
or termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case of
sick leave, military leave or any other leave of absence approved by the Company
in the case of transfers between payroll locations of the Company or between the
Company, an Affiliate or a successor, or in the case of a Director's performance
of services in an emeritus or advisory capacity.
3.09 "Date of Conversion" means the date of the conversion of the
Bank from mutual to stock form.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which
in the sole and absolute discretion of the Committee, is reasonably expected to
be of indefinite duration and to substantially prevent a Participant from
fulfilling his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or
an Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule
16b-3 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended.
3.15 "Participant" means an Employee or Director who holds a Plan
Share Award.
3.16 "Plan" means this North Arkansas Bancshares, Inc. Management
Recognition Plan.
3.17 "Plan Shares" means shares of Common Stock held in the Trust
which are awarded or issuable to a Participant pursuant to the Plan.
3.18 "Plan Share Award" means a right granted under this Plan to
receive Plan Shares.
3.19 "Plan Share Reserve" means the shares of Common Stock held by
the Trustee pursuant to Sections 5.02 and 5.03.
3.20 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.21 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.22 "Year of Service" shall mean a full twelve-month period,
measured from the date of a Plan Share Award and each annual anniversary of that
date, during which a Participant's Continuous Service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role and Powers of the Committee. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by those members
of the Board who are Non-Employee Directors, and by the Board if there are less
than two Non-Employee Directors.
The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations
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necessary or advisable for the administration of the Plan. The Committee shall
have and may exercise such other power and authority as may be delegated to it
by the Board from time to time. Subject to Section 4.02, the 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, and 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 may
recommend to the Board one or more persons or entity to act as Trustee(s) in
accordance with the provisions of this Plan and the Trust.
4.02 Role of the Board. The members of the Committee 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. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard to
the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 Limitation on Liability. No member of the Board or the Committee
or the Trustee(s) 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 or any Trustee 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 Company shall indemnify such member, subject to the
indemnification provisions of 12 C.F.R. Section 545.121, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Bank may also make contributions to the
Trust. Such amounts shall be paid to the Trustee at the time of contribution. No
contributions to the Trust by Employees shall be permitted.
5.02 Investment of Trust Assets; Maximum Plan Share Awards. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of Conversion. Common Stock purchased by the Trust may be newly issued
shares, treasury shares, or shares held in a grantor trust.
5.03 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. The Committee may make Plan Share Awards to Employees
and Directors. In selecting those individuals to whom Plan Share Awards will be
granted and the number of shares covered by such Awards, the
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Committee shall consider the position, duties and responsibilities of the
eligible individuals, the value of their services to the Company and its
Affiliates, and any other factors the Committee may deem relevant.
Notwithstanding the foregoing, (i) the Committee shall automatically make the
Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii) no
Employee shall receive Plan Share Awards relating to more than 25% of the Plan
Shares reserved under Section 5.02, and no non-employee Director shall receive
Plan Share Awards relating to more than 5% of the Plan Shares reserved under
Section 5.02, with all non-employee Directors as a group receiving Plan Share
Awards on the Effective Date relating to no more than 30% of the Plan Shares
reserved under Section 5.02. [Not applicable if Plan is implemented more than
one year after Date of Conversion.]
6.02 Allocations. The Committee will determine which Employees and
Directors will be granted discretionary Plan Share Awards, and the number of
Shares covered by each Plan Share Award, provided that in no event shall any
Awards be made which will violate the governing instruments of the Bank or its
Affiliates or any applicable federal or state law or regulation. In the event
Plan Shares are forfeited for any reason or additional shares of Common Stock
are purchased by the Trustee, the Committee may, from time to time, determine
which of the individuals referenced in Section 6.01 above will be granted
additional Plan Share Awards to be awarded from the forfeited or acquired Plan
Shares.
6.03 Form of Allocation. As promptly as practicable after a
determination is made pursuant to Section 6.02 that a Plan Share Award is to be
made, the Committee shall notify the Participant 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 may be earned. The date on which the
Committee so notifies the Participant shall be considered the date of grant of
the Plan Share Awards. The Committee shall maintain records as to all grants of
Plan Share Awards under the Plan.
6.04 Automatic Grants to Non-Employee Directors. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for a number of Shares equal to the lesser of five (5%) of the number of Plan
Shares which the Trust is authorized to purchase pursuant to Section 5.02 of the
Plan and the quotient obtained by dividing --
(i) thirty percent (30%) of the number of Plan Shares which the
Trust is authorized to purchase pursuant to Section 5.02 of
the Plan, by
(ii) the number of Directors entitled to receive Plan Share Awards
on the Effective Date, pursuant to this Section 6.04.
[Formula and limit may change if Plan is adopted more than one year
after the Date of Conversion.]
Plan Share Awards received under the provisions of this Section shall
become vested and nonforfeitable according to the general rules set forth in
subsections (a), and (b) of Section 7.01, and the Committee shall have no
discretion to alter or accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Section, the Plan Share
Awards to be granted hereunder shall be subject to all other provisions of this
Plan.
6.05 Automatic Grants to Employees. On the Effective Date, each of
the following individuals shall receive a Plan Share Award as to the number of
Plan Shares listed below, provided that such award shall not be made to an
individual who is not an Employee on the Effective Date:
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Brad Snider 25%
[Formula and limit may change if Plan is adopted more than one year
after the Date of Conversion.]
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Directors are eligible to receive discretionary Awards under the Plan.
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 Allocations Not Required. Notwithstanding anything to the
contrary in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no
Employee or Director shall have any right or entitlement to receive a Plan Share
Award hereunder, such Awards being at the total discretion of the Committee, nor
shall any Employees or Directors as a group have such a right. The Committee
may, with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Twenty percent (20%) of the Plan Shares subject
to a Plan Share Award shall be earned and become nonforfeitable by a Participant
upon his or her completion of each of five Years of Service. [May be different
if Plan receives stockholder approval more than one year after the Date of
Conversion.]
(b) Exception for Terminations Due to Death or Disability.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [If the Plan receives stockholder approval more than one year after
the Date of Conversion, vesting would accelerate to 100% upon a Participant's
retirement or termination of service in connection with a change in control.]
7.02 Accrual of Dividends. Whenever Plan Shares are paid to a
Participant or Beneficiary under Section 7.03, such Participant or Beneficiary
shall also be entitled to receive, with respect to each Plan Share paid, an
amount equal to any cash dividends (including special large and nonrecurring
dividends, including one that has the effect of a return of capital to the
Company's stockholders) and a number of shares of Common Stock equal to any
stock dividends, declared and paid with respect to a share of Common Stock
between the date the relevant Plan Share Award was initially granted to such
Participant and the date the Plan Shares are being distributed. There shall also
be distributed an appropriate amount of net earnings, if any, of the Trust with
respect to any cash dividends so paid out.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Except as provided in
subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) Form of Distribution. The Trustee shall distribute all Plan
Shares, together with any shares representing stock dividends, in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned. Payments representing cash dividends (and earnings thereon) shall be
made in cash.
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(c) Withholding. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares. The
Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) Timing: Exception for 10% Shareholders. Notwithstanding
subsections (a) and (b) above, no Plan Shares may be distributed prior to the
date which is five (5) years from the Date of Conversion to the extent the
Participant or Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a majority vote of
non-employee directors of the Board. To the extent this limitation would delay
the date on which a Participant receives Plan Shares, the Participant may elect
to receive from the Trust, in lieu of vested Plan Shares, a cash amount equal to
the fair market value of such Plan Shares. Any Plan Shares remaining
undistributed solely by reason of the operation of this Subsection (d) shall be
distributed to the Participant or his Beneficiary on the date which is five
years from the Date of Conversion.
(e) Regulatory Exceptions. No Plan Shares shall be distributed unless
and until all of the requirements of all applicable law and regulation shall
have been fully complied with, including the receipt of approval of the Plan by
the stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 Voting of Plan Shares. All shares of Common Stock held by the
Trust (whether or not subject to a Plan Share Award) shall be voted by the
Trustee in the same proportion as the trustee of the Company's Employee Stock
Ownership Plan votes Common Stock held in the trust associated therewith, and in
the absence of any such voting, shall be voted in the manner directed by the
Board.
7.05. Deferral Elections by Participants. At any time that is at
least six months prior to the date on which a Participant becomes vested in the
first 20% of his or her Plan Share Award, the Participant may irrevocably elect,
on the form attached hereto as Exhibit "A" (the "Election Form"), to defer the
receipt of all or a percentage of the Plan Shares that would otherwise be
transferred to the Participant upon the vesting of such award (the "Deferred
Shares"). The MRP Committee shall establish and maintain an individual account
in the name of each Participant who files an Election Form for the purpose of
tracking deferred earnings attributable to cash dividends paid on Deferred
Shares (the "Cash Account"). On the last day of each fiscal year of the Company,
the Committee shall credit to the Participant's Cash Account earnings on the
balance of the Cash Account at a rate equal to the yield on Common Stock, as
determined from time to time by the MRP Committee in its sole discretion.
The Deferred Shares, together with any cash or stock dividends
attributable thereto (the "Deferred Earnings"), will be distributed to the
Participant in accordance with the deferral schedule (the "Deferral Schedule")
selected by the Participant in his or her Election Form. The Trustee shall hold
each Participant's Deferred Shares and Deferred Earnings in the Trust until
distribution is required pursuant to the election set forth in the Participant's
Election Form.
Notwithstanding any other provision of the Plan or a Participant's
Election Form, in the event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the Participant may apply
to the Committee for a distribution of all or a portion of his Deferred Shares
and Deferred Earnings prior to the basis for any such distribution. The hardship
must result from a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which are
not considered hardships include post-secondary school expenses or the desire to
purchase a residence. In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant's nonessential assets to the
extent such liquidation would not itself cause a severe financial hardship. The
amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant's financial hardship. The determination
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of whether a Participant has a qualifying hardship and the amount which
qualifies for distribution, if any, shall be made by the Committee in its sole
discretion. The Committee may require evidence of the purpose and amount of the
need, and may establish such application or other procedures as it deems
appropriate.
Notwithstanding any other provision of the Plan or a Participant's
Election Form, in the event the Participant suffers an unforeseeable emergency
hardship within the contemplation of this paragraph, the Participant may apply
to the Committee for a distribution of all or a portion of his Deferred Shares
and Deferred Earnings prior to the basis for any such distribution. The hardship
must result from a sudden and unexpected illness or accident of the Participant
or a dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which are
not considered hardships include post-secondary school expenses or the desire to
purchase a residence. In no event will a distribution be made to the extent the
hardship could be relieved through reimbursement or compensation by insurance or
otherwise, or by liquidation of the Participant's nonessential assets to the
extent such liquidation would not itself cause a severe financial hardship. The
amount of any distribution hereunder shall be limited to the amount necessary to
relieve the Participant's financial hardship. The determination of whether a
Participant has a qualifying hardship and the amount which qualifies for
distribution, if any, shall be made by the Committee in its sole discretion. The
Committee may require evidence of the purpose and amount of the need, and may
establish such application or other procedures as it deems appropriate.
No Participant may assign his or her claim to Deferred Shares and
Deferred Earnings during his or her lifetime, and any deferral election made
hereunder shall be irrevocable. A Participant's right to Deferred Shares and
Deferred Earnings shall at all times constitute an unsecured promise of the
Company to pay benefits as they come due. The right of the Participant or his or
her beneficiary to receive benefits hereunder shall be solely an unsecured claim
against the general assets of the Company. Neither the Participant nor his or
her beneficiary shall have any claim against or rights in any specific assets or
other fund of the Company, and any assets in the Trust shall be deemed general
assets of the Company.
All distributions made by the Company and/or the Trustees pursuant to
elections made hereunder shall be subject to applicable federal, state, and
local tax withholding and to such other deductions as shall at the time of such
payment be required under any income tax or other law, whether of the United
States or any other jurisdiction, and, in the case of payments to a beneficiary,
the delivery to the Committee and/or Trustees of all necessary waivers,
qualifications and other documentation.
ARTICLE VIII
MISCELLANEOUS
8.01 Adjustments for Capital Changes.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of
shares which may be purchased under the Plan, and the number and kind of shares
subject to outstanding Plan Share Awards, shall be proportionately adjusted for
any increase, decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity.
In the event of (i) the liquidation or dissolution of the Company, (ii) a merger
or consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) Conditions and Restrictions on New, Additional, or Different
Shares or Securities. If, by reason of any adjustment made pursuant to this
Section, a Participant becomes entitled to new, additional, or different shares
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of stock or securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions and restrictions
which were applicable to the shares pursuant to the Plan Share Award before the
adjustment was made. In addition, the Committee shall have the discretionary
authority to impose on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable, including but
not limited to a right of first refusal, or repurchase option, or both of these
restrictions.
(d) Other Issuances. Except as expressly provided in this Section,
the issuance by the Company or an Affiliate of shares of stock of any class, or
of securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 Amendment and Termination of Plan. The Board may, by
resolution, at any time amend or terminate the Plan; provided that no amendment
or termination of the Plan shall, without the written consent of a Participant,
impair any rights or obligations under a Plan Share Award theretofore granted to
the Participant.
The power to amend or terminate the Plan in accordance with this
Section 8.02 shall include the power to direct the Trustee to return to the
Company all or any part of the assets of the Trust, including shares of Common
Stock held in the Plan Share Reserve. However, the termination of the Trust
shall not affect a Participant's right to earn Plan Share Awards and to receive
a distribution of Common Stock relating thereto, including earnings thereon, in
accordance with the terms of this Plan and the grant by the Committee or the
Board.
8.03 Nontransferability. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 No Employment or Other 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, either express or implied, on the part of any Employee or Director to
continue in the service of the Company, the Bank, or an Affiliate thereof.
8.05 Voting and Dividend Rights. No Participant 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 prior to the time said Plan Shares are
actually distributed to him.
8.06 Governing Law. The Plan and Trust shall be governed and
construed under the laws of the State of Arkansas to the extent not preempted by
Federal law.
8.07 Effective Date. The Plan shall become effective immediately
upon its approval by a favorable vote of stockholders of the Company who own at
least a majority of the total votes eligible to be cast at a duly called meeting
of the Company's stockholders held in accordance with applicable laws, provided
that the Plan shall not be submitted for such approval within the six-month
period after the Date of Conversion. [STOCKHOLDER APPROVAL MAY BE UNNECESSARY,
OR INVOLVE A DIFFERENT VOTE REQUIREMENT, IF THE PLAN IS IMPLEMENTED MORE THAN
ONE YEAR AFTER THE DATE OF CONVERSION.] In no event shall Plan Share Awards be
made prior to the Effective Date.
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8.08 Term of Plan. This Plan shall remain in effect until the
earlier of (i) termination by the Board, or (ii) the distribution of all assets
of the Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 Tax Status of Trust. It is intended that (i) the Trust
associated with the Plan be treated as a grantor trust of the Company under the
provisions of Section 671 et seq. of the Code, as the same may be amended from
time to time, and (ii) that in accordance with Revenue Procedure 92-65 (as the
same may be amended from time to time), Participants have the status of general
unsecured creditors of the Company, the Plan constitutes a mere unfunded promise
to make benefit payments in the future, the Plan is unfunded for tax purposes
and for purposes of Title I of the Employee Retirement Income Security Act of
1974, as amended, and the Trust has been and will continue to be maintained in
conformity with Revenue Procedure 92-64 (as the same may be amended from time to
time).
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TRUST AGREEMENT
UNDER THE NORTH ARKANSAS BANCSHARES, INC.
MANAGEMENT RECOGNITION PLAN
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Trust Agreement
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This Agreement made this _____ day of _________, 1997 by and between
North Arkansas Bancshares, Inc. (the "Company") and Non-Employee Directors Paul
K. Holmes, John Minor, Kaneaster Hodges, Jr., and O.E. Guinn, Jr. (acting by
majority, the "Trustee").
WHEREAS, the Company maintains the North Arkansas Bancshares, Inc.
Management Recognition Plan (the "Plan"), and has incurred or expects to incur
liability under the terms of the Plan with respect to the individuals
participating in the Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish this Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
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(a) The Company hereby deposits, or will shortly hereafter deposit,
with the Trustee in trust (i) a number of shares of the Company's common stock
("Common Stock") equal to four percent (4%) of the number of shares of Common
Stock issued by the Company in connection with the conversion of Newport Federal
Savings Bank (the "Bank") from mutual-to-stock form, or (ii) an amount expected
to be sufficient to permit the Trust to purchase said shares. Said shares or
amount shall become the initial principal of the Trust to be held, administered
and disposed of by the Trustee as provided in this Trust Agreement.
(b) The Trust shall become irrevocable upon the effective date of the
Plan.
(c) The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes of Participants and general creditors
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as herein set forth. Participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust Agreement shall be mere
unsecured contractual rights of Participants and their beneficiaries against the
Company. Any assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
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(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants
or their beneficiaries as they become due under the terms of the Plan. The
Company shall notify the Trustee of its decision to make payment of benefits
directly prior to the time amounts are payable to Participants or their
beneficiaries. In addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in accordance with the
terms of the Plan, the Company shall make the balance of each such payment as it
falls due. The Trustee shall notify the Company where principal and earnings are
not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust
--------------------------------------------------------------
Beneficiary When Company Is Insolvent.
- -------------------------------------
(a) The Trustee shall cease payment of benefits to Participants and
their beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee
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shall have no duty to inquire whether the Company is Insolvent. The Trustee may
in all events rely on such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a reasonable basis
for making a determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company
is Insolvent, the Trustee shall discontinue payments to Plan participants or
their beneficiaries, shall liquidate the Trust's investment in Common Stock, and
shall hold the assets of the Trust for the benefit of the Company's general
creditors. Nothing in this Trust Agreement shall in any way diminish any rights
of Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to
Participants or their beneficiaries in accordance with Section 2 of this Trust
Agreement only after the Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the investment of
Trust assets, except that to the extent reasonably practicable, the Trustee
shall invest all assets of the Trust in Common Stock provided that the Trust
shall not purchase from time to time a number of shares of Common Stock
exceeding 4% of the shares of Common Stock issued in the Bank's mutual-to-stock
conversion.
(b) All rights associated with assets of the Trust shall be exercised
by the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for
any reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Bank; third, directors of the Bank; fourth, officers of the
Bank; fifth, members of the general public.
Section 6. - Disposition of Income.
----------------------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
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Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions required to be
made, including such specific records as shall be agreed upon in writing between
the Company and the Trustee. Within 60 days following the close of each fiscal
year of the Company and within 20 days after the removal or resignation of the
Trustee, the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchased and sold with the cost or
net proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities and other property
held in the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any
of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred
on trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and dividing
the gains therefrom, within the meaning of section 301.7701-2 of the Procedure
and Administrative Regulations promulgated pursuant to the Code.
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's
fees and expenses relating to the Plan and this Trust. If not so paid, the fees
and expenses shall be paid from the Trust.
-4-
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee (or any individual serving as one of the trustees who act
by majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who
act by majority as the Trustee) resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date or
resignation or removal under this section. If no such appointment has been made,
the Trustee may apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in connection with
the proceeding shall be allowed as administrative expenses of the Trust. Upon
resignation or removal of the Trustee and appointment of a successor trustee,
all assets shall subsequently be transferred to the successor trustee. The
transfer shall be completed within 60 days after receipt of notice of
resignation, removal or transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10
hereof, the Company may appoint any other party as a successor to replace the
Trustee upon resignation or removal. The appointment shall be effective when
accepted in writing by the new trustee, who shall have all of the rights and
powers of the former trustee, including ownership rights in the Trust assets.
The former trustee shall execute any instrument necessary or reasonably
requested by the Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company, provided that no such amendment shall
make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms hereof. Upon termination of the Trust, the Trustee shall return any
assets remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits), the Company may
terminate this Trust prior to the time all benefit payments under the Plan have
been made. All assets in the Trust at termination shall be returned to the
Company.
-5-
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered or subjected to attachment, garnishment,
levy, execution or other legal or equitable process, except pursuant to the
terms of the Plan.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas, to the extent not preempted
by federal law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in
effect from time to time.
(e) The Trustee shall act by vote or written consent of a majority
of its duly appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this day__ of___________ , 1997.
ATTEST: NORTH ARKANSAS BANCSHARES, INC.
- --------------------
By
----------------------------------
Its President
ATTEST:
- -------------------- ------------------------------------
Paul K. Holmes, Trustee
- -------------------- ------------------------------------
John Minor, Trustee
- -------------------- ------------------------------------
Kancaster Hodges, Jr., Trustee
- -------------------- ------------------------------------
O.E. Guinn, Jr., Trustee
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