<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Subsection 240.14a-11(c) or
Subsection 240.14a-12
[ ] Confidential, For use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
HEARTLAND BANCSHARES, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. (NO FEE NOW
REQUIRED)
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1. Title of each class of securities to which
transaction applies:
_________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
_________________________________________________________________
3. Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state
how it was determined):
_________________________________________________________________
4. Proposed maximum aggregate value of transaction:
_________________________________________________________________
5. Total fee paid:
_________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1. Amount Previously Paid:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________<PAGE>
<PAGE>
[HEARTLAND BANCSHARES LETTERHEAD]
December 27, 1996
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of
Stockholders of Heartland Bancshares, Inc. to be held at the
Herrin Civic Center, 101 South 16th Street, Herrin, Illinois on
Tuesday, January 28, 1997 at 2:00 p.m., local time. The attached
Notice of Special Meeting and Proxy Statement describe the formal
business to be transacted at the meeting.
WE URGE YOU TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
AS SOON AS POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE
SPECIAL MEETING. Your vote is important, regardless of the
number of shares you own. This will not prevent you from voting
in person but will assure that your vote is counted if you are
unable to attend the meeting. On behalf of your Board of
Directors, thank you for your interest and support.
Sincerely,
/s/ Roger O. Hileman
Roger O. Hileman
President<PAGE>
<PAGE>
_________________________________________________________________
HEARTLAND BANCSHARES, INC.
318 SOUTH PARK AVENUE
HERRIN, ILLINOIS 62948-3604
(618) 942-7373
_________________________________________________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held on January 28, 1997
_________________________________________________________________
NOTICE IS HEREBY GIVEN that a Special Meeting of
Stockholders (the "Meeting") of Heartland Bancshares, Inc. (the
"Company"), will be held at the Herrin Civic Center, 101 South
16th Street, Herrin, Illinois at 2:00 p.m. on Tuesday, January
28, 1997.
A Proxy Card and a Proxy Statement for the Meeting are
enclosed.
The Meeting is for the purpose of considering and acting
upon:
1. Approval of the Heartland Bancshares, Inc. 1996 Stock
Option and Incentive Plan;
2. Approval of the Heartland Bancshares, Inc. Management
Recognition Plan; and
3. The transaction of such other matters as may properly
come before the Meeting or any adjournments thereof.
The Board of Directors is not aware of any other business to
come before the Meeting.
Any action may be taken on any one of the foregoing pro-
posals at the Meeting on the date specified above or on any date
or dates to which, by original or later adjournment, the Meeting
may be adjourned. Stockholders of record at the close of busi-
ness on December 16, 1996, are the stockholders entitled to
notice of and to vote at the Meeting and any adjournments
thereof.
You are requested to fill in and sign the enclosed form of
proxy which is solicited by the Board of Directors and to mail it
promptly in the enclosed envelope. The proxy will not be used if
you attend and vote at the Meeting in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christy L. Cripps
CHRISTY L. CRIPPS
SECRETARY
Herrin, Illinois
December 27, 1996
_________________________________________________________________
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE YOUR COMPANY
THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A
QUORUM. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES. PLEASE ACT PROMPTLY.
_________________________________________________________________
<PAGE>
<PAGE>
_________________________________________________________________
PROXY STATEMENT
OF
HEARTLAND BANCSHARES, INC.
318 SOUTH PARK AVENUE
HERRIN, ILLINOIS 62948-3604
SPECIAL MEETING OF STOCKHOLDERS
January 28, 1997
_________________________________________________________________
________________________________________________________________
GENERAL
_________________________________________________________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Heartland
Bancshares, Inc. (the "Company") to be used at a Special Meeting
of Stockholders of the Company (the "Meeting") which will be held
at the Herrin Civic Center, 101 South 16th Street, Herrin,
Illinois on Tuesday, January 28, 1997, at 2:00 p.m., local time.
The accompanying notice of meeting and this Proxy Statement are
being first mailed to stockholders on or about December 27, 1996.
On June 28, 1996, First Federal Savings and Loan Association
of Herrin (the "Association") completed its conversion from
mutual to stock form, with the Company becoming its sole
stockholder. Subsequently, the Association converted to a
national bank with the corporate title "Heartland National Bank"
(the "Bank"), (collectively, the "Conversion").
_________________________________________________________________
VOTING AND REVOCABILITY OF PROXIES
_________________________________________________________________
Stockholders who execute proxies retain the right to revoke
them at any time. Unless so revoked, the shares represented by
such proxies will be voted at the Meeting and all adjournments
thereof. Proxies may be revoked by written notice to the Secre-
tary of the Company, at the address shown above, by filing of a
later dated proxy prior to a vote being taken on a particular
proposal at the Meeting or by attending the Meeting and voting in
person. Proxies solicited by the Board of Directors of the
Company will be voted in accordance with the directions given
therein. WHERE NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE
VOTED IN FAVOR OF EACH OF THE PROPOSALS SET FORTH IN THIS PROXY
STATEMENT TO BE CONSIDERED AT THE MEETING. The proxy confers
discretionary authority on the persons named therein to vote with
respect to the matters incident to the conduct of the Meeting.
Proxies marked as abstentions, and shares held in street name
which have been designated by brokers on proxies as not voted,
will not be counted as votes cast. An abstention will have the
same effect as a negative vote. Proxies marked as abstentions or
as broker non-votes will, however, be treated as shares present
for purposes of determining whether a quorum is present.
_________________________________________________________________
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
________________________________________________________________
The securities entitled to notice of and to vote at the
Meeting consist of the Company's common stock, par value $.01 per
share (the "Common Stock"). Stockholders of record as of the
close of business on December 16, 1996 (the "Record Date"), are
entitled to one vote for each share of Common Stock then held.
As of the Record Date, there were 876,875 shares of Common Stock
issued and outstanding. The presence, in person or by proxy, of
at least one-third of the total number of shares of Common Stock
outstanding and entitled to vote will be necessary to constitute
a quorum at the Meeting.
Persons and groups owning in excess of 5% of the Common
Stock are required to file certain reports regarding such
ownership pursuant to the Securities Exchange Act of 1934 with
the Company and the Securities and<PAGE>
<PAGE>
Exchange Commission ("SEC"). Based on such reports (and certain
other written information received by the Company), management
knows of no persons other than those set forth below who owned
more than 5% of the outstanding shares of Common Stock as of the
Record Date. The following table sets forth, as of the Record
Date, certain information as to those persons who were the
beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock, the shares beneficially owned by each
director of the Company and shares beneficially owned by all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP(1) OUTSTANDING
- ------------------- ------------ ------------
<S> <C> <C>
Heartland Bancshares, Inc. 70,150 (2) 8.0%
Employee Stock Ownership Plan
318 South Park Avenue
Herrin, Illinois 62948-3604
Barrett Rochman 62,109 7.08
P.O. Box 3074
Carbondale, Illinois 62901
Paul R. Calcaterra 22,000 2.51
B.D. Cross 25,000 2.85
Roger O. Hileman 24,000 2.74
Charles Stevens 25,000 2.85
James C. Walker 25,000 2.85
Randall A. Youngblood 25,000 2.85
All directors and executive officers 16.65%
as a group (6 persons)
<FN>
____________
(1) Includes all shares held directly as well as by spouses or
as custodian or trustee for minor children, and shares held
by a group acting in concert, over which shares the named
individuals effectively exercise sole voting and investment
power, or for a group acting in concert, share voting and
investment power.
(2) These shares are held in a suspense account for future
allocation among participating employees as the loan used to
purchase the shares is repaid. The ESOP trustees, currently
Directors Walker, Stevens, Youngblood, Cross and Calcaterra,
vote all allocated shares in accordance with instructions of
the participants. Unallocated shares and shares for which
no instructions have been received generally are voted by
the ESOP trustees in the same ratio as participants direct
the voting of allocated shares or, in the absence of such
direction, as directed by the Company's Board of Directors.
</FN>
</TABLE>
2<PAGE>
<PAGE>
_________________________________________________________________
EXECUTIVE COMPENSATION
_________________________________________________________________
Summary Compensation Table. The following table sets forth
cash and noncash compensation for the fiscal year ended December
31, 1995 awarded to or earned by the Company's Chief Executive
Officer for services rendered in all capacities to the
Association and its subsidiaries.
<TABLE>
<CAPTION>
Annual Compensation
---------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation
- ------------------ ------ ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Roger O. Hileman 1995 $80,000 $8,190 $ -- $6,058 (1)
President and Chief
Executive Officer
<FN>
____________
(1) Consists of commuting reimbursement.
</FN>
</TABLE>
Employment Agreements. The Company and the Bank entered
into separate employment agreements (the "Employment Agreements")
with Mr. Roger O. Hileman, President and Chief Executive Officer
of the Bank and of the Company. In such capacities, Mr. Hileman
is responsible for overseeing all operations of the Bank and the
Company, and for implementing the policies adopted by the Board
of Directors. Such Boards believe that the Employment Agreements
assure fair treatment of Mr. Hileman in relation to his career
with the Company and the Bank by assuring him of some financial
security. The agreements have been approved by the Office of
Thrift Supervision ("OTS").
The Employment Agreements became effective on the date of
completion of the Conversion and provide for a term of three
years, with an annual base salary of $84,000. On each
anniversary date from the date of commencement of the Employment
Agreements, the term of his employment under the Employment
Agreements may be extended for an additional one-year period
beyond the then effective expiration date, upon a determination
by the Board of Directors that the performance of Mr. Hileman has
met the required performance standards and that such Employment
Agreements should be extended. Each Employment Agreement
provides Mr. Hileman with a salary review by the Board of
Directors not less often than annually, as well as with inclusion
in any discretionary bonus plans, retirement and medical plans,
customary fringe benefits, and vacation and sick leave. The
Employment Agreements will terminate upon his death or
disability, and are terminable by the Company and Bank for "just
cause" as defined in the Employment Agreements. In the event of
termination for just cause, no severance benefits are available.
If the Company or the Bank terminates Mr. Hileman's employment
without just cause or takes action constituting a constructive
discharge he will be entitled to a payment of his salary up to
the Employment Agreement's expiration date, plus said salary for
an additional 12-month period, and, at the Employee's election,
either cash in an amount equal to the cost to him of obtaining
health, life, disability, and other benefits through the
Employment Agreement's expiration date, or continued
participation under the Bank benefit plans through the Employment
Agreement's expiration date, but only to the extent Mr. Hileman
continues to qualify for participation therein. Amounts payable
to Mr. Hileman will be paid, at the option of Mr. Hileman, either
in periodic payments through the Employment Agreement's
expiration date, or in one lump sum within ten (10) days of such
termination. If the Employment Agreements are terminated due to
the Mr. Hileman's "disability" (as defined in the Employment
Agreements), Mr. Hileman will be entitled to a continuation of
his salary and benefits for up to 180 days following such
termination. In the event of Mr. Hileman's death during the term
of the Employment Agreements, his estate will be entitled to
receive his salary through the end of the month in which Mr.
Hileman's death occurred.
3<PAGE>
<PAGE>
Severance benefits payable to Mr. Hileman or to his estate will
be paid in a lump sum or in installments, as he (or his estate)
elects. Mr. Hileman is able to voluntarily terminate his
Employment Agreement by providing 90 days' written notice to the
Boards of Directors of the Bank and the Company, in which case he
is entitled to receive only his compensation, vested rights and
benefits up to the date of termination.
The Employment Agreements contain provisions stating that in
the event of Mr. Hileman's involuntary termination of employment
in connection with, or within one year after, any change in
control of the Bank or the Company, other than for "just cause,"
Mr. Hileman will be paid within 10 days of such termination an
amount equal to the difference between (i) 2.99 times his "base
amount," as defined in Section 280G(b)(3) of the Internal Revenue
Code, and (ii) the sum of any other parachute payments, as
defined under Section 280G(b)(2) of the Internal Revenue Code,
that Mr. Hileman receives on account of the change in control.
"Control" generally refers to the acquisition, by any person or
entity, of the ownership or power to vote more than 25% of the
Bank's or Company's voting stock, the control of the election of
a majority of the Bank's or the Company's directors, or the
exercise of a controlling influence over the management or
policies of the Bank or the Company. In addition, under the
Employment Agreements, a change in control occurs when, during
any consecutive two-year period, directors of the Company or the
Bank, at the beginning of such period, cease to constitute at
least a majority of the Board of Directors of the Company or the
Bank, provided the election of said directors was approved by at
least a majority of the initial directors then in office. The
Employment Agreement with the Bank provides that within 5
business days of a change in control, the Bank shall fund, or
cause to be funded, a trust in the amount of 2.99 times his base
amount, that will be used to pay Mr. Hileman amounts owed to him
upon termination, other than for just cause, within one year of
the change in control. The Employment Agreements also provide
for a similar lump sum payment to be made in the event of his
voluntary termination of employment within 30 days of a change in
control of the Bank or the Company. Alternatively, Mr. Hileman
may voluntarily terminate his employment within one year of a
change in control and be entitled to receive a similar payment,
upon the occurrence, or within 90 days thereafter, of certain
specified events following the change in control, which have not
been consented to in writing by him, including (i) the
requirement that he perform his principal executive functions
more than 30 miles from his current primary office, (ii) a
material reduction in his base compensation as then in effect,
(iii) the failure of the Company or the Bank to maintain existing
or substantially similar employee benefit plans, (iv) the
assignment to him of duties and responsibilities which are other
than those normally associated with his position, (v) a material
reduction in his authority and responsibility, and (vi) the
failure to re-elect him to the Company's or the Bank's Board of
Directors.
The aggregate payments that would be made to Mr. Hileman,
assuming his termination of employment under the foregoing
circumstances at December 31, 1995, would have been approximately
$240,000. In the event that Mr. Hileman prevails over the
Company and the Bank in a legal dispute as to the Employment
Agreement, he will be reimbursed for his legal and other
expenses.
_________________________________________________________________
DIRECTORS' COMPENSATION
_________________________________________________________________
Each member of the Company's and the Bank's Boards of
Directors (the same six individuals) receives a monthly retainer
of $200 plus $150 per Board meeting attended for their service as
Company directors, and $400 per month plus $250 per Board meeting
attended for their service as Bank directors. Members of the
Board's Loan Committee receive an additional $25 per Loan
Committee meeting attended. During the year ended December 31,
1995, directors' fees totaled $48,075. Directors also
participate in certain benefit plans of the Company and the Bank.
Director Retirement Plan. The Bank's Board of Directors
adopted the First Federal Savings and Loan Association of Herrin
Retirement Plan for Directors (the "Directors' Plan"), effective
December 31, 1995, for its directors who are members of the
Association's Board of Directors at some time on or after the
plan's effective date. On June 28, 1996, the date of completion
of the Conversion, the Bank assumed the obligations of the
Directors' Plan. Under the Directors' Plan, a bookkeeping
account in each participant's name is credited with "Performance
Units"
4<PAGE>
<PAGE>
according to the following formula: (i) 70 "Performance Units"
for each full year of service as a director prior to 1996, plus
(ii) 100 Performance Units for each full year of service as a
director after 1995, with the value of each Performance Unit
equal to the average fair market value of one share of Common
Stock as of December 31st of each of the three years preceding
the determination date (or such shorter period as to which
trading information is available). A participant's vested
interest ("Vested Percentage") in Performance Units credited on
the plan's effective date equals 50% if the participant serves on
the Board for less than a year after December 31, 1995, increases
to 75% if the participant completes 2 years of service after
1995, and becomes 100% if the participant completes a third year
of service after 1995. In the event a participant's service on
the Board is terminated due to death or disability, the
participant's Vested Percentage becomes 100% regardless of the
number of years of service. Performance Units credited after the
plan's effective date are fully vested at all times.
A participant's vested benefits under the Directors' Plan
will be paid in substantially equal installments over a 10-year
period after the participant's service as a director terminates
for any reason, unless a director's service on the Board is
terminated for "just cause." Notwithstanding the foregoing, a
participant may elect, within 30 days after becoming a
participant, to have his or her account paid in a single lump sum
distribution or in annual payments over a period of less than ten
years. If a participant dies before receiving all benefits
payable under the Directors' Plan, such payments shall be made to
his or her beneficiary or, if no beneficiary has been designated
or if the designated beneficiary has predeceased the participant,
to the participant's estate. Benefits under the Directors' Plan
are nontransferable. The Bank will pay all benefits in cash from
its general assets, and expects to establish a trust in order to
hold assets with which to pay benefits. Trust assets will be
subject to the claims of the Bank's general creditors. In the
event a participant prevails over the Bank in a legal dispute as
to the terms or interpretation of the Directors' Plan, he or she
will be reimbursed for his or her legal and other expenses.
_________________________________________________________________
TRANSACTIONS WITH MANAGEMENT
_________________________________________________________________
The Bank offers loans to its directors and officers. These
loans currently are made in the ordinary course of business with
the same collateral, interest rates and underwriting criteria as
those of comparable transactions prevailing at the time and to
not involve more than the normal risk of collectibility or
present other unfavorable features. Under current law, the
Bank's loans to directors and executive officers are required to
be made on substantially the same terms, including interest
rates, as those prevailing for comparable transactions and must
not involve more than the normal risk of repayment or present
other unfavorable features. Furthermore, all loans to such
persons must be approved in advance by a disinterested majority
of the Board of Directors. At December 31, 1995, the Bank's
loans to directors and executive officers totalled $432,000, or
9.09% of the Bank's retained earnings at that date.
_________________________________________________________________
PROPOSAL I -- APPROVAL OF THE HEARTLAND BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
_________________________________________________________________
GENERAL
The Board of Directors of the Company has adopted the
Heartland Bancshares, Inc. 1996 Stock Option and Incentive Plan
(the "Option Plan"), subject to its approval by the Company's
stockholders. The initial grant of stock options under the
Option Plan will occur upon the Option Plan's receipt of
stockholder approval (the "Effective Date"). The Option Plan is
attached hereto as Exhibit A and should be consulted for
additional information. All statements made herein regarding the
Option Plan, which are only intended to summarize the Option
Plan, are qualified in their entirety by reference to the Option
Plan.
5<PAGE>
<PAGE>
PURPOSE OF THE OPTION PLAN
The purpose of the Option Plan is to advance the interests
of the Company by providing directors and selected employees of
the Company and its affiliates, including the Bank, with the
opportunity to acquire shares of Common Stock. By encouraging
such stock ownership, the Company seeks to attract, retain, and
motivate the best available personnel for positions of
substantial responsibility and to provide additional incentive to
directors and employees of the Company and its affiliates to
promote the success of the business of the Company.
DESCRIPTION OF THE OPTION PLAN
Effective Date. The Option Plan will become effective on
the date of its approval by the Company's stockholders (the
"Effective Date"), and prior thereto no awards may be made.
Administration. The Option Plan is administered by a
committee (the "Committee"), appointed by the Board of Directors,
consisting of at least two directors of the Company who are "Non-
employee Directors" within the meaning of the federal securities
laws. The Committee has discretionary authority to select
participants and grant awards, to determine the form and content
of any awards made under the Option Plan, to interpret the Option
Plan, and to make other decisions necessary or advisable in
connection with administering the Option Plan. All decisions,
determinations, and interpretations of the Committee are final
and conclusive on all persons affected thereby. Members of the
Committee will be indemnified to the full extent permissible
under the Company's governing instruments in connection with any
claims or other actions relating to any action taken under the
Option Plan. As of the date hereof, the members of the
Committee are Directors Calcaterra, Cross, Stevens, Walker, and
Youngblood.
Eligible Persons; Types of Awards. Under the Option Plan,
the Committee may grant stock options ("Options") and stock
appreciation rights ("SARs") (collectively, "Awards") to such
employees as the Committee shall designate. A director who is
not an employee will receive the automatic grant described below
(see "Automatic Grants"), and is otherwise ineligible to receive
Awards under the Option Plan. As of the Record Date, the Company
and its subsidiaries had approximately three employees and five
non-employee directors who were eligible to participate in the
Option Plan.
Shares Available for Grants. The Option Plan reserves
87,687 authorized but unissued or treasury shares of Common Stock
for issuance upon the exercise of Options or SARs. Such shares
may be (i) authorized but unissued shares, (ii) shares held in
treasury, or (iii) shares repurchased by the Plan or an
associated trust on the open market. In the event of any 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 receipt or payment of consideration by the
Company, the Committee will adjust the number and kind of shares
reserved for issuance, and the number and kind of shares subject
to outstanding Awards, and the exercise price of such Awards
under the Option Plan. Generally, the number of shares as to
which SARs are granted are charged against the aggregate number
of shares available for grant under the Option Plan, provided
that, in the case of an SAR granted in conjunction with an
Option, under circumstances in which the exercise of the SAR
results in termination of the Option and vice versa, only the
number of shares of Common Stock subject to the Option shall be
charged against the aggregate number of shares of Common Stock
remaining available under the Option Plan. If Awards should
expire, become unexercisable or be forfeited for any reason
without having been exercised, the shares of Common Stock subject
to such Awards shall, unless the Option Plan shall have been
terminated, be available for the grant of additional Awards under
the Option Plan.
Options. Options may be either incentive stock options
("ISOs") as defined in Section 422 of the Code, or options that
are not ISOs ("Non-ISOs"). The exercise price as to any Option
may not be less than the fair market value (determined under the
Option Plan) of the optioned shares on the date of grant. In the
case of a participant who owns more than 10% of the outstanding
Common Stock on the date of grant, such option price may not be
less than 110% of fair market value of the shares. As required
by federal tax laws, to the extent that the aggregate fair
6<PAGE>
<PAGE>
market value (determined when an ISO is granted) of the Common
Stock with respect to which ISOs are exercisable by an optionee
for the first time during any calendar year (under all plans of
the Company and of any subsidiary) exceeds $100,000, the Options
granted in excess of $100,000 will be treated as Non-ISOs, and
not as ISOs.
Automatic Grants. On the Effective Date, certain employees
and each director of the Company or the Bank who is not an
employee but is a director on the Effective Date will receive a
one-time grant of an Option to purchase shares of Common Stock
at an exercise price per share equal to its fair market value on
the Effective Date (see "Stock Options Granted" and "New Plan
Benefits" below). With respect to each Option granted on the
Effective Date, the exercise price per share will equal its fair
market value on the Effective Date. In addition, each non-
employee director who joins the Board of Directors of the Company
or an affiliate (including the Bank) after the Effective Date
will receive, on the date of joining the Board, Non-ISOs to
purchase 1,753 shares of Common Stock at an exercise price per
share equal to the fair market value of the Common Stock on the
date of grant. Options granted to non-employee directors will
have a term of ten years, and expire one year after a director
terminates service on the Board for any reason (two years in the
event of the director's death), but in no event later than the
date on which such Options would otherwise expire.
SARs. An SAR may be granted in tandem with all or part of
any Option granted under the Option Plan, or without any
relationship to any Option. An SAR granted in tandem with an ISO
must expire no later than the ISO, must have the same exercise
price as the ISO and may be exercised only when the ISO is
exercisable and when the fair market value of the shares subject
to the ISO exceeds the exercise price of the ISO. For SARs
granted in tandem with Options, the optionee's exercise of the
SAR cancels his or her right to exercise the Option, and vice
versa. Regardless of whether an SAR is granted in tandem with an
Option, exercise of the SAR will entitle the optionee to receive,
as the Committee prescribes in the grant, all or a percentage of
the difference between (i) the fair market value of the shares of
Common Stock subject to the SAR at the time of its exercise, and
(ii) the fair market value of such shares at the time the SAR was
granted (or, in the case of SARs granted in tandem with Options,
the exercise price). The exercise price as to any particular SAR
may not be less than the fair market value of the optioned shares
on the date of grant.
Exercise of Options and SARs. The exercise of Options and
SARs will be subject to such terms and conditions as are
established by the Committee in a written agreement between the
Committee and the optionee, provided that each Option, including
all Options granted on the Effective Date, shall become
exercisable with respect to 20% of the underlying shares on each
of the five annual anniversary dates of the date on which the
Award occurred. Such vesting shall accelerate to 100% upon an
optionee's termination of service as an employee or director due
to death or disability (as defined in the Option Plan). In the
absence of Committee action to the contrary, an otherwise
unexpired Option shall cease to be exercisable upon (i) an
optionee's termination of employment for "just cause" (as defined
in the Option Plan), (ii) the date three months after an optionee
terminates service for a reason other than just cause, death, or
disability, (iii) the date one year after an optionee terminates
service due to disability, or (iv) the date two years after an
optionee terminates service due to death. Upon an optionee's
exercise of an Option, the Company may, in the discretion of the
Committee, pay the optionee a cash amount up to any dividends
declared on the underlying shares between the date of grant and
the date of exercise of the Option.
An optionee may exercise Options or SARs, subject to provi-
sions relative to their termination and limitations on their
exercise, only by (i) written notice of intent to exercise the
Option or SAR with respect to a specified number of shares of
Common Stock, and (ii) in the case of Options, payment to the
Company (contemporaneously with delivery of such notice) in cash,
in Common Stock, or a combination of cash and Common Stock, of
the amount of the exercise price for the number of shares with
respect to which the Option is then being exercised. Common
Stock utilized in full or partial payment of the exercise price
for Options shall be valued at its market value at the date of
exercise, and may consist of shares subject to the Option being
exercised.
7<PAGE>
<PAGE>
Conditions on Issuance of Shares. The Committee will have
the discretionary authority to impose, in agreements, such
restrictions on shares of Common Stock issued pursuant to the
Option Plan as it may deem appropriate or desirable, including
but not limited to the authority to impose a right of first
refusal or to establish repurchase rights or both of these
restrictions. In addition, the Committee may not issue shares
unless the issuance complies with applicable securities laws, and
to that end may require that a participant make certain
representations or warranties. In any event, Common Stock
purchased upon exercise of an Option or SAR may not be sold
within the six-month period following the grant date of that
Option or SAR, except in the event of the participants death or
disability, or such other event as the Board may deem
appropriate.
Nontransferability. Optionees may transfer their Awards to
family members or trusts under specified circumstances. Awards
may otherwise 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.
Effect of Dissolution and Related Transactions. 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
Awards, together with the exercise prices thereof, will be
equitably adjusted for any change or exchange of shares for a
different number or kind of shares which results from the
Transaction. However, any such adjustment will be made in such a
manner as to not constitute a modification, within the meaning of
Section 424(h) of the Code, of outstanding ISOs. The exercise
price of outstanding Options will also be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to
shareholders.
Duration of the Option Plan and Grants. The Option Plan has
a term of 10 years from the Effective Date, after which date no
Awards may be granted. The maximum term for an Award is 10 years
from the date of grant, except that the maximum term of an ISO
(and an SAR granted in tandem with an ISO) may not exceed five
years if the optionee owns more than 10% of the Common Stock on
the date of grant. The expiration of the Option Plan, or its
termination by the Committee, will not affect any Award then
outstanding.
Amendment and Termination of the Option Plan. The Board of
Directors of the Company may from time to time amend the terms of
the Option Plan and, with respect to any shares at the time not
subject to Awards, suspend or terminate the Option Plan. No
amendment, suspension, or termination of the Option Plan will,
without the consent of any affected optionee, alter or impair any
rights or obligations under any Award previously granted.
Stockholder approval may not be required for plan amendments that
would not (i) materially increase the benefits accruing to plan
participants, (ii) materially increase the number of securities
which may be issued under the plan, or (iii) materially modify
eligibility requirements for plan participation.
Financial Effects of Awards. The Company will receive no
monetary consideration for the granting of Awards under the
Option Plan. It will receive no monetary consideration other
than the exercise price for shares of Common Stock issued to
optionees upon the exercise of their Options, and will receive no
monetary consideration upon the exercise of SARs. Under current
accounting standards, recognition of compensation expense is not
required when Options are granted at an exercise price equal to
or exceeding the fair market value of the Common Stock on the
date the Option is granted.
The granting of SARs will require charges to the income of
the Company based on the amount of the appreciation, if any, in
the average market price of the Common Stock to which the SARs
relate over the exercise price of those shares. If the average
market price of the Common Stock declines subsequent to a charge
against earnings due to estimated appreciation in the Common
Stock subject to SARs, the amount of the decline will reverse
such prior charges against earnings (but not by more than the
aggregate of such prior charges).
8
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
ISOs. An optionee recognizes no taxable income upon the
grant of ISOs. If the optionee holds the shares purchased upon
exercise of an ISO for at least two years from the date the ISO
is granted, and for at least one year from the date the ISO is
exercised, any gain realized on the sale of the shares received
upon exercise of the ISO is taxed as long-term capital gain.
However, the difference between the fair market value of the
Common Stock on the date of exercise and the exercise price of
the ISO will be treated by the optionee as an item of tax
preference in the year of exercise for purposes of the
alternative minimum tax. If an optionee disposes of the shares
before the expiration of either of the two special holding
periods noted above, the disposition is a "disqualifying
disposition." In this event, the optionee will be required, at
the time of the disposition of the Common Stock, to treat the
lesser of the gain realized or the difference between the
exercise price and the fair market value of the Common Stock at
the date of exercise as ordinary income and the excess, if any,
as capital gain.
The Company will not be entitled to any deduction for
federal income tax purposes as the result of the grant or
exercise of an ISO, regardless of whether or not the exercise of
the ISO results in liability to the optionee for alternative
minimum tax. However, if an optionee has ordinary income taxable
as compensation as a result of a disqualifying disposition, the
Company will be entitled to deduct an equivalent amount.
Non-ISOs. In the case of a Non-ISO, an optionee will
recognize ordinary income upon the exercise of the Non-ISO in an
amount equal to the difference between the fair market value of
the shares on the date of exercise and the option price (or, if
the optionee is subject to certain restrictions imposed by the
federal securities laws, upon the lapse of those restrictions
unless the optionee makes a special tax election within 30 days
after the date of exercise to have the general rule apply). Upon
a subsequent disposition of such shares, any amount received by
the optionee in excess of the fair market value of the shares as
of the exercise will be taxed as capital gain. The Company will
be entitled to a deduction for federal income tax purposes at the
same time and in the same amount as the ordinary income
recognized by the optionee in connection with the exercise of a
Non-ISO.
SARs. The grant of an SAR has no tax effect on the optionee
or the Company. Upon exercise of the SARs, however, any cash or
Common Stock received by the optionee in connection with the
surrender of his or her SAR will be treated as compensation
income to the optionee, and the Company will be entitled to a
business expense deduction for the amounts treated as
compensation income.
PROPOSED STOCK OPTIONS GRANTS
For information relating to grants to be made under the
Option Plan at the Effective Date, see "New Plan Benefits" below.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the Option Plan
is desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of Directors
is seeking stockholder approval of the Option Plan pursuant to
the requirements of the OTS and to satisfy the requirements of
the Code for favorable tax treatment of ISOs.
Stockholder approval of the Option Plan requires the
affirmative vote of the holders of a majority of the votes
eligible to be cast at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE OPTION PLAN.
9<PAGE>
<PAGE>
_________________________________________________________________
Proposal II -- Approval of the Heartland Bancshares, Inc.
Management Recognition Plan
_________________________________________________________________
GENERAL
The Board of Directors of the Company has adopted the
Heartland Bancshares, Inc. Management Recognition Plan (the
"MRP"), subject to its approval by the Company's stockholders.
The initial grant of MRP awards will occur upon the MRP's receipt
of stockholder approval. A copy of the MRP is attached hereto as
Exhibit B, and should be consulted for additional information.
All statements made herein regarding the MRP, which are only
intended to summarize the MRP, are qualified in their entirety by
reference to the MRP. The MRP complies with OTS regulations,
although the OTS in no way endorses or approves the MRP and no
oral or written representations to the contrary have been or
shall be made.
PURPOSE OF THE MRP
The purpose of the MRP is to reward and retain personnel of
experience and ability in key positions of responsibility by
providing such persons with a proprietary interest in the
Company, with compensation for their past contributions to the
Company and its subsidiaries, and with an incentive to make such
contributions in the future.
DESCRIPTION OF THE MRP
Effective Date. The MRP will become effective immediately
upon its approval by the Company's stockholders (the "Effective
Date"), and prior thereto no awards may be made.
Administration. The MRP will be administered by an MRP
Committee consisting of not less than two members of the Board
who are "Non-employees Directors" within the meaning of the
federal securities laws. Except as limited by the express
provisions of the MRP or by resolutions adopted by the Board, the
MRP Committee has sole and complete authority and discretion (1)
to select and grant MRP awards to employees, (2) to determine the
form and content of MRP awards to be issued under the MRP, (3) to
interpret the MRP, (4) to prescribe, amend, and rescind rules and
regulations relating to the MRP, and (5) to make other
determinations necessary or advisable for the administration of
the MRP. The MRP provides that members of the MRP Committee
shall be indemnified and held harmless for actions taken under
the MRP in good faith and in the best interests of the Company
and its subsidiaries. As of the Record Date, the MRP Committee
consists of Directors Calcaterra, Cross, Stevens, Walker and
Youngblood.
MRP Trust; Purchase Limitations. The assets of the MRP will
be held in a trust (the "MRP Trust"), as to which Directors
Calcaterra, Cross, Stevens, Walker and Youngblood will act as
trustees ("MRP Trustees") and thereby have the responsibility to
invest all funds contributed to the MRP Trust by the Company or
the Bank. With funds contributed by the Company, the MRP Trust
will purchase, in the aggregate, 35,075 shares of the Company's
Common Stock on the Effective Date. Said number of shares is the
maximum that the MRP Trust may purchase, in the aggregate,
pursuant to the MRP. Common Stock purchased by the MRP Trust may
be acquired on the open market or in the form of shares newly
issued by the Company. Said number of shares is the maximum that
the MRP Trust may purchase, in the aggregate, pursuant to the
MRP. In the event an MRP award is forfeited for any reason or
additional shares are purchased by the MRP Trust associated with
an MRP, the MRP Committee may make awards with respect to such
shares.
Types of Awards; Eligible Persons. The MRP Committee has
the discretion to select employees of the Company and/or of the
Bank who will receive discretionary MRP awards. In selecting
those employees to whom MRP awards will be granted and the number
of shares covered by such awards, the MRP Committee will consider
the position, duties and responsibilities of the eligible
employees, the value of their services to the Company and its
10<PAGE>
<PAGE>
affiliates (including the Bank), and any other factors the MRP
Committee may deem relevant. In addition, the MRP specifically
provides for certain automatic awards to certain employees and
all non-employee directors (see "Automatic Awards" below).
Automatic Awards. Certain employees and each director of
the Company or the Bank who is not an employee on the Effective
Date will receive a one-time award on the Effective Date (see
"New Plan Benefits" below). In addition, each non-employee
director who joins the Board of Directors of the Company
subsequent to the Effective Date will receive on the date of
joining the Board a one-time award of 701 shares (or such lesser
number of shares as are available under the MRP).
Vesting. Pursuant to the MRP, freely transferable shares
of Common Stock will be transferred to participants as they
become vested in their MRP awards. MRP awards will become 20%
vested on each of the five anniversary dates of the award,
provided, with respect to each vesting date, that the participant
is an employee or a director of the Company or a subsidiary on
such date. All shares of Common Stock subject to outstanding
awards will be immediately 100% earned and nonforfeitable upon a
participant's death or disability (as defined in the MRP). If a
participant terminates employment for reasons other than death or
disability, the participant forfeits all rights to the shares
then under restriction.
Distributions of Shares; Voting; Dividends. All unvested
shares of Common Stock held by the MRP Trust (whether or not
subject to an MRP award) shall be voted by the MRP Trustees in
the same proportion as the trustee of the Company's Employee
Stock Ownership Plan trust votes Common Stock held therein. The
MRP Trustees shall distribute all shares, together with any
shares representing stock dividends, in the form of Common Stock.
One share of Common Stock shall be given for each share earned.
Payments representing cash dividends (and earnings thereon) will
be made in cash.
In no event may shares received by a participant pursuant to
the MRP be sold within the six-month period following the date of
the underlying award, except in the event of the Participant's
death or disability, or such other event as the Board may
specifically deem appropriate.
No Plan Shares may be distributed from the MRP Trust prior
to the date which is five years from the date of the Bank's
conversion from mutual to stock form to the extent the recipient
would after receipt of such shares own in excess of ten percent
of the issued and outstanding shares of Common Stock, unless such
action is approved in advance by a majority vote of the non-
employee directors of the Company's Board of Directors. Any
shares remaining undistributed solely by reason of the operation
of this rule shall be distributed to the recipient on the date
which is five years from the date of the Bank's conversion to
stock form.
Nontransferability. Participants may transfer their MRP
awards to family members or trusts under specified circumstances.
MRP awards and rights to shares held in the MRP Trust are not
otherwise transferable by participants in the MRP, and during the
lifetime of a participant, shares held in the MRP Trust may only
be earned by and paid to the participant.
Taxation. Participants will recognize compensation income
when their interest vests, or at an earlier date pursuant to a
participant's election to accelerate recognition pursuant to
Section 83(b) of the Internal Revenue Code.
Financial Effects of Awards. Neither the Company nor the
Bank will receive any monetary consideration for the granting of
awards under the MRP. Under current accounting standards, when
MRP awards are granted, the Company must recognize compensation
expense based on the fair market value of the Common Stock on the
date the awards are granted, with such amount being amortized
over the expected vesting period for the award.
Adjustments for Capital Changes. In the event of any
merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of
11<PAGE>
<PAGE>
shares is changed without receipt or payment of consideration by
the Company, the MRP Committee will adjust both the number and
kind of shares of stock as to which awards may be awarded under
the MRP, and the number and kind of shares of stock subject to
outstanding MRP awards. 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, all outstanding MRP awards shall be equitably 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.
Amendment and Termination of the MRP. The Company's Board
of Directors may, by resolution, at any time amend or terminate
the MRP, provided that no amendment or termination of the MRP
will, without the written consent of any affected holders of an
MRP award, impair any rights or obligations under any MRP award
previously granted.
The power to amend or terminate includes the power to direct
the MRP Trustees to return to the Company all or any part of the
assets of the MRP Trust, including shares of Common Stock held in
the plan share reserve of the MRP. However, the termination of
the MRP Trust may not affect a participant's right to earn
outstanding MRP awards and to receive Common Stock relating
thereto, including earnings thereon, in accordance with the terms
of the MRP and the particular MRP award made to the participant.
Stockholder approval may not be required for plan amendments that
would not materially increase the benefits accruing to plan
participants, materially increase the number of securities which
may be issued under the plan or materially modify eligibility
requirements for plan participation.
Duration of the MRP. The MRP and MRP Trust will remain in
effect until the earlier of (i) termination by the Company's
Board of Directors, or (2) the distribution of all assets of the
MRP Trust. Termination of the MRP will not affect any MRP awards
previously granted, and such MRP awards will remain valid and in
effect until they have been earned and distributed from the MRP
Trust, or by their terms expire or are forfeited.
Proposed MRP Awards. For information relating to the
proposed MRP awards, see "New Plan Benefits" below.
RECOMMENDATION AND VOTE REQUIRED
The Board of Directors has determined that the MRP is
desirable, cost effective, and produces incentives which will
benefit the Company and its stockholders. The Board of Directors
is seeking stockholder approval of the MRP in order to satisfy
the requirements of the OTS.
Approval of the MRP requires the affirmative vote of the
holders of a majority of the votes eligible to be cast at the
Annual Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
APPROVAL OF THE MRP.
12<PAGE>
<PAGE>
_________________________________________________________________
NEW PLAN BENEFITS
_________________________________________________________________
The following table sets forth certain information regarding
the benefits to be received under the Option Plan and the MRP.
<TABLE>
<CAPTION>
Option Plan MRP
------------------------- --------------------------
Dollar Number Dollar Number
Value($)(1) of Units(2) Value($)(3) of Units(2)
------------------------- ---------------------------
<S> <C> <C> <C> <C>
Roger O. Hileman, President
and Chief Executive Officer $ -- 21,921 $131,520 8,768
Ronald D. Maddox, Vice President -- 21,921 65,760 4,384
Christy L. Cripps, Secretary/Treasurer -- 21,921 65,760 4,384
Paul R. Calcaterra, Director -- 4,384 26,295 1,753
B.D. Cross, Director -- 4,384 26,295 1,753
Charles Stevens, Director -- 4,384 26,295 1,753
James C. Walker, Director -- 4,384 26,295 1,753
Randall A. Youngblood, Director -- 4,384 26,295 1,753
All executive officers as a
group (1 person) -- 65,763 131,520 8,768
All directors who are not
executive officers as a
group (5 persons) -- 21,920 131,475 8,765
All employees who are not
executive officers as a
group (2 persons) -- 43,844 131,520 8,768
<FN>
___________
(1) Based on the fair market value of the Common Stock on the
date of grant less the exercise price. All Options will be
granted at an exercise price equal to the fair market value
of the underlying shares of Common Stock on the date of the
grant, which will occur upon receipt of stockholder approval
at this Special Meeting.
(2) All Options and MRP Awards listed herein will be granted at
the Effective Dates of the Option Plan and MRP, upon receipt
of approval of the Option Plan by stockholders at this
Special Meeting. See "Proposal I -- Approval of the
Heartland Bancshares, Inc. 1996 Stock Option and Incentive
Plan," and "Proposal II -- Approval of the Heartland
Bancshares, Inc. Management Recognition Plan."
(3) Based on the closing price of the underlying Common Stock of
$15.00 per share as quoted on the National Daily Quotation
System "Pink Sheets" on December 16, 1996.
</FN>
</TABLE>
13<PAGE>
<PAGE>
_________________________________________________________________
BENEFICIAL OWNERSHIP REPORTS
_________________________________________________________________
Pursuant to regulations promulgated under the Exchange Act,
the Company's officers, directors and persons who own more than
ten percent of the outstanding Common Stock are required to file
reports detailing their ownership and changes of ownership in
such Common Stock, and to furnish the Company with copies of all
such reports. Because the Company was not subject to the
Exchange Act during the 1995 fiscal year, no reports of
beneficial ownership were required to be filed during that year.
_________________________________________________________________
OTHER MATTERS
_________________________________________________________________
The Board of Directors is not aware of any business to come
before the Meeting other than those matters described above in
this Proxy Statement. However, if any other matters should pro-
perly come before the Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance
with the determination of the Board of Directors.
_________________________________________________________________
MISCELLANEOUS
_________________________________________________________________
The cost of soliciting proxies will be borne by the Company.
The Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them
in sending proxy materials to the beneficial owners of Common
Stock. In addition to solicitations by mail, directors, officers
and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional
compensation.
_________________________________________________________________
STOCKHOLDER PROPOSALS
_________________________________________________________________
In order to be eligible to be considered for inclusion in
the Company's proxy materials for the next Annual Meeting of
Stockholders, any stockholder proposal to take action at such
meeting must be received at the Company's executive offices at
318 South Park Avenue, Herrin, Illinois 62948-364, no later than
January 1, 1997. Any such proposal shall be subject to the re-
quirements of the proxy rules adopted under the Securities
Exchange Act of 1934.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Christy L. Cripps
CHRISTY L. CRIPPS
SECRETARY
Herrin, Illinois
December 27, 1996
<PAGE>
<PAGE>
Exhibit A
HEARTLAND BANCSHARES, INC.
1996 STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Heartland Bancshares, Inc. 1996 Stock
Option and Incentive Plan (the "Plan") is to advance the
interests of the Company through providing select key Employees
and Directors of the Bank, the Company, and their Affiliates with
the opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the
best available personnel for positions of substantial respon-
sibility and to provide additional incentive to Directors and key
Employees of the Company or any Affiliate to promote the success
of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "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 Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(d) "Bank" shall mean Heartland National Bank.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(g) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof.
(h) "Common Stock" shall mean the common stock of the
Company.
(i) "Company" shall mean Heartland Bancshares, Inc.
(j) "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.
A-1<PAGE>
<PAGE>
(k) "Director" shall mean any member of the Board, and
any member of the board of directors of any Affiliate that the
Board has by resolution designated as being eligible for
participation in this Plan.
(l) "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.
(m) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
(n) "Employee" shall mean any person employed by the
Company, the Bank, or an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(p) "ISO" means an option to purchase Common Stock which
meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(q) "Market Value" shall mean the fair market value of
the Common Stock, as determined under Paragraph 7(b) hereof.
(r) "Non-employee Director" shall have the meaning
provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an
Award granted pursuant to this Plan.
(v) "Participant" shall mean any person who receives an
Award pursuant to the Plan.
(w) "Plan" shall mean this 1996 Stock Option and
Incentive Plan.
(x) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(y) "Share" shall mean one share of Common Stock.
A-2<PAGE>
<PAGE>
(z) "SAR" (or "Stock Appreciation Right") means a right
to receive the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of Common
Stock.
(aa) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant's Continuous
Service has not terminated for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 16 hereof. No Award shall be
granted under the Plan after ten years from the Effective Date.
(b) Term of Awards. The term of each Award granted
under the Plan shall be established by the Committee, but shall
not exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under
Section 11, the aggregate number of Shares deliverable pursuant
to Awards shall not exceed 87,687 Shares, which equals 10% of the
Shares issued by the Company in connection with the Bank's
conversion from mutual to stock form. Such Shares may either be
authorized but unissued Shares, Shares repurchased by the Plan or
an associated trust on the open market, or Shares held in
treasury. If any Awards should expire, become unexercisable, or
be forfeited for any reason without having been exercised, the
Optioned Shares shall, unless the Plan shall have been
terminated, be available for the grant of additional Awards under
the Plan.
(b) Special Rule for SARs. The number of Shares with
respect to which an SAR is granted, but not the number of Shares
which the Company delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against the
aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in
conjunction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and vice
versa, only the number of Shares subject to the Option shall be
charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to
which option rights have terminated by reason of the exercise of
a related SAR, as provided in Paragraph 10 hereof, shall not be
available for the grant of further Options under the Plan.
A-3<PAGE>
<PAGE>
5. ADMINISTRATION OF THE PLAN.
(a) Composition of the Committee. The Plan shall be
administered by the Committee, which shall consist of not less
than two (2) members of the Board who are Non-employee Directors.
Members of the Committee shall serve at the pleasure of the
Board. 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.
(b) Powers of the Committee. 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 select Participants and grant Awards, (ii) to
determine the form and content of Awards to be issued in the form
of Agreements 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 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. A majority of
the entire Committee shall constitute a quorum and the action 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 deemed the action of
the Committee.
(c) Agreement. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the
Committee. Each such Agreement shall constitute a binding
contract between the Company and the Participant, and every
Participant, upon acceptance of such Agreement, shall be bound by
the terms and restrictions of the Plan and of such Agreement.
The terms of each such Agreement shall be in accordance with the
Plan, but each Agreement may include such additional provisions
and restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are not
inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise
Price of an Option or SAR, (ii) the number of Shares subject to,
and the expiration date of, the Award, (iii) the manner, time and
rate (cumulative or otherwise) of exercise or vesting of such
Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such
Award.
The Chairman of the Committee and such other Directors and
officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Awards.
(d) Effect of the Committee's Decisions. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) Indemnification. In addition to such other rights
of indemnification as they may have, the members of the Committee
shall be indemnified by the Company in connection with any claim,
action, suit or proceeding relating to any action taken or
failure to act under or in
A-4<PAGE>
<PAGE>
connection with the Plan or any Award, granted hereunder to the
full extent provided for under the Company's governing
instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS.
(a) General Rule. Only Employees shall be eligible to
receive Awards. In selecting those Employees to whom Awards will
be granted and the number of shares covered by such Awards, the
Committee shall consider the position, duties and
responsibilities of the eligible Employees, the value of their
services to the Company and its Affiliates, and any other factors
the Committee may deem relevant. Notwithstanding the foregoing,
the Committee shall automatically make the Awards specified in
Sections 6(b) and 9 hereof, and (ii) no Employee shall receive
Options to purchase more than 25% of the Shares reserved under
Paragraph 4(a), and no non-Employee Director shall receive
Options to purchase more than 5% of the Shares reserved under
Paragraph 4(a), with all non-Employee Directors as a group
receiving Options on the Effective Date to purchase no more than
30% of the Shares reserved under Paragraph 4(a).
(b) Automatic Grants to Employees. On the Effective Date,
each of the following Employees shall receive an Option (in the
form of an ISO, to the extent permissible under the Code) to
purchase the number of Shares listed below, at an Exercise Price
per Share equal to the Market Value of a Share on the Effective
Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective
Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Christy L. Cripps 25%
Roger O. Hileman 25%
Ronald D. Maddox 25%
With respect to each of the above-named Participants, the
Option granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth in
Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as
of the date the Option is granted, of the Shares with respect to
which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option plans,
as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may grant
Options in excess
A-5<PAGE>
<PAGE>
of the foregoing limitations, in which case such Options granted
in excess of such limitation shall be Options which are Non-ISOs.
7. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price
as to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In the
case of an Employee who owns Shares representing more than 10% of
the Company's outstanding Shares of Common Stock at the time an
ISO is granted, the Exercise Price shall not be less than 110% of
the Market Value of the Optioned Shares at the time the ISO is
granted.
(b) Standards for Determining Exercise Price. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average of
the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a national
securities exchange on the date in question, then the Market
Value per Share shall be the mean between the bid and asked price
on such date, or, if there is no bid and asked price on such
date, then on the next prior business day on which there was a
bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with
respect to twenty percent (20%) of the Optioned Shares upon the
Participant's completion of each of five Years of Service,
provided that an Option shall become fully (100%) exercisable
immediately upon termination of the Participant's Continuous
Service due to the Participant's Disability or death. An Option
may not be exercised for a fractional Share.
(b) Procedure for Exercise. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of intent
to exercise the Option with respect to a specified number of
Shares, and (2) payment to the Company (contemporaneously with
delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which the
Option is then being exercised. Each such notice (and payment
where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at the Company's executive offices. Common Stock
utilized in full or partial payment of the Exercise Price for
Options shall be valued at its Market Value at the date of
exercise, and may consist of Shares subject to the Option being
exercised. Upon a Participant's exercise of an Option, the
Company shall pay the Participant a cash amount equal to any
dividends declared on the underlying Shares between the date of
grant and the date of exercise of the Option.
A-6<PAGE>
<PAGE>
(c) Period of Exercisability. Except to the extent
otherwise provided in the terms of an Agreement, an Option may be
exercised by a Participant only while he is an Employee and has
maintained Continuous Service from the date of the grant of the
Option, or within three months after termination of such
Continuous Service (but not later than the date on which the
Option would otherwise expire), except if the Employee's
Continuous Service terminates by reason of -
(1) "Just Cause" which for purposes hereof shall have
the meaning set forth in any unexpired employment or severance
agreement between the Participant and the Bank and/or the Company
(and, in the absence of any such agreement, 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), then the Participant's rights to exercise such
Option shall expire on the date of such termination;
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option immediately prior
to his death, such Option of the deceased Participant may be
exercised within two years from the date of his death (but not
later than the date on which the Option would otherwise expire)
by the personal representatives of his estate or person or
persons to whom his rights under such Option shall have passed by
will or by laws of descent and distribution;
(3) Disability, then to the extent that the
Participant would have been entitled to exercise the Option
immediately prior to his or her Disability, such Option may be
exercised within one year from the date of termination of
employment due to Disability, but not later than the date on
which the Option would otherwise expire.
(d) Effect of the Committee's Decisions. The Committee's
determination whether a Participant's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
(e) Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, Common Stock that is
purchased upon exercise of an Option or SAR may not be sold
within the six-month period following the grant date of that
Option or SAR, except in the event of the Participant's death or
Disability, or such other event as the Board may specifically
deem appropriate.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. 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,
Non-ISOs to purchase a number of Shares equal to the lesser of
five percent (5%) of the number of Shares reserved under
Paragraph 4(a) hereof, and the quotient obtained by dividing -
A-7<PAGE>
<PAGE>
(i) 30 percent (30%) of the number of Shares reserved
under Paragraph 4(a) hereof, by
(ii) the number of Directors entitled to receive an
Option on the Effective Date, pursuant to this Paragraph 9(a).
Such Non-ISOs shall have an Exercise Price per Share equal
to the Market Value of a Share on the date of grant. Each
Director who joins the Board after the Effective Date and who is
not then an Employee shall receive, on the date of joining the
Board, Non-ISOs to purchase 2% of the Shares reserved under
Paragraph 4(a) of the Plan, at an Exercise Price per Share equal
to its Market Value on the date of grant.
(b) Terms of Exercise. Options received under the
provisions of this Paragraph will become exercisable in
accordance with the general rule set forth in Paragraph 8(a)
hereof, and may be exercised from time to time by (a) written
notice of intent to exercise the Option with respect to all or a
specified number of the Optioned Shares, and (b) payment to the
Company (contemporaneously with the delivery of such notice), in
cash, in Common Stock, or a combination of cash and Common Stock,
of the amount of the Exercise Price for the number of the
Optioned Shares with respect to which the Option is then being
exercised. Each such notice and payment shall be delivered, or
mailed by prepaid registered or certified mail, addressed to the
Treasurer of the Company at the Company's executive offices. A
Director who exercises Options pursuant to this Paragraph may
satisfy all applicable federal, state and local income and
employment tax withholding obligations, in whole or in part, by
irrevocably electing to have the Company withhold shares of
Common Stock, or to deliver to the Company shares of Common Stock
that he already owns, having a value equal to the amount required
to be withheld; provided that to the extent not inconsistent
herewith, such election otherwise complies with those
requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of
ten years; provided that Options granted under this Paragraph
shall expire one year after the date on which a Director
terminates Continuous Service on the Board, but in no event later
than the date on which such Options would otherwise expire. In
the event of such Director's death during the term of his
directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years
from the date of his death by the personal representatives of his
estate or person or persons to whom his rights under such Options
shall have passed by will or by laws of descent and distribution,
but in no event later than the date on which such Options would
otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Options shall
become immediately exercisable, and such Options may be exercised
within one year of the termination of directorship due to
Disability, but not later than the date that the Options would
otherwise expire. Unless otherwise inapplicable or inconsistent
with the provisions of this Paragraph, the Options to be granted
to Directors hereunder shall be subject to all other provisions
of this Plan.
A-8<PAGE>
<PAGE>
(c) Effect of the Committee's Decisions. The
Committee's determination whether a Participant's Continuous
Service has ceased, and the effective date thereof, shall be
final and conclusive on all persons affected thereby.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee
may from time to time grant SARs to Employees either in
conjunction with, or independently of, any Options granted under
the Plan. An SAR granted in conjunction with an Option may be an
alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of shares purchased upon
exercise of the Option and, correspondingly, the exercise of the
SAR terminates the Option to the extent of the number of Shares
with respect to which the SAR is exercised. Alternatively, an
SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An
SAR may not be granted in conjunction with an ISO under
circumstances in which the exercise of the SAR affects the right
to exercise the ISO or vice versa, unless the SAR, by its terms,
meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference
between the Exercise Price of the ISO and the Market Value of the
Shares subject to the ISO at the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may be
exercised; and
(5) The SAR may be exercised only when the Market Value
of the Shares subject to the ISO exceeds the Exercise Price of
the ISO.
(b) Exercise Price. The Exercise Price as to any
particular SAR shall not be less than the Market Value of the
Optioned Shares on the date of grant.
(c) Timing of Exercise. Any election by a Participant
to exercise SARs shall be made during the period beginning on the
3rd business day following the release for publication of
quarterly or annual financial information and ending on the 12th
business day following such date. This condition shall be deemed
to be satisfied when the specified financial data is first made
publicly available. In no event, however, may an SAR be
exercised within the six-month period following the date of its
grant.
The provisions of Paragraph 8(c) regarding the period of
exercisability of Options are incorporated by reference herein,
and shall determine the period of exercisability of SARs.
A-9<PAGE>
<PAGE>
(d) Exercise of SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the excess of the then
aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the
aggregate Exercise Price of such number of Optioned Shares. This
amount shall be payable by the Company, in the discretion of the
Committee, in cash or in Shares valued at the then Market Value
thereof, or any combination thereof.
(e) Procedure for Exercising SARs. To the extent not
inconsistent herewith, the provisions of Paragraph 8(b) as to the
procedure for exercising Options are incorporated by reference,
and shall determine the procedure for exercising SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number
and kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for any
increase, decrease, change or exchange of Shares 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 Awards, together with the Exercise Prices thereof,
shall be equitably adjusted for any change or exchange of Shares
for a different number or kind of shares or other securities
which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning of
Section 424(h) of the Code, of outstanding ISOs.
(d) Conditions and Restrictions on New, Additional, or
Different Shares or Securities. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares 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
Award before the adjustment was made.
A-10<PAGE>
<PAGE>
(e) Other Issuances. Except as expressly provided in
this Paragraph, the issuance by the Company or an Affiliate of
shares of stock of any class, or of securities convertible into
Shares 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, class,
or Exercise Price of Shares then subject to Awards or reserved
for issuance under the Plan.
(f) Certain Special Dividends. The Exercise Price of
shares subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return to capital to the
stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to
Paragraph 8(b) or 9(b) hereof.
12. NON-TRANSFERABILITY OF AWARDS.
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 Awards may transfer such Awards (but not ISOs) 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. 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 Paragraph 12.
Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and
conditions as applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the determina-
tion of granting such Award, and the Effective Date. Notice of
the determination shall be given to each Participant to whom an
Award is so granted within a reasonable time after the date of
such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders owning 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 Bank
completes its mutual-to-stock conversion and provided further
that the Plan's effectiveness shall be contingent on its approval
by the Office of Thrift Supervision. No Awards may be made prior
to approval of the Plan by the stockholders of the Company.
A-11<PAGE>
<PAGE>
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize
the Committee to direct execution of an instrument providing for
the modification of any outstanding Award, provided no such
modification shall confer on the holder of said Award any right
or benefit which could not be conferred on him by the grant of a
new Award at such time, or impair the Award without the consent
of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any at the time not subject to Awards,
suspend or terminate the Plan.
No amendment, suspension or termination of the Plan shall,
without the consent of any affected holders of an Award, alter or
impair any rights or obligations under any Award theretofore
granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common
Stock shall not be issued with respect to any Award unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) Special Circumstances. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of any
liability in respect of the non-issuance or sale of such Shares.
As a condition to the exercise of an Option or SAR, the Company
may require the person exercising the Option or SAR to make such
representations and warranties as may be necessary to assure the
availability of an exemption from the registration requirements
of federal or state securities laws.
(c) Committee Discretion. The Committee shall have the
discretionary authority to impose in Agreements such restrictions
on Shares as it may deem appropriate or desirable, including but
not limited to the authority to impose a right of first refusal
or to establish repurchase rights or both of these restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
A-12<PAGE>
<PAGE>
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of
Options and/or SARs shall be subject to the Participant's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares
that he already owns, having a value equal to the amount required
to be withheld. The value of the Shares to be withheld, or
delivered to the Company, shall be based on the Market Value of
the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell
without notice, a number of such Shares sufficient to cover the
amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to
participate or participation in the Plan create or be deemed to
create any legal or equitable right of the Employee, Director, or
any other party to continue service with the Company, the Bank,
or any Affiliate of such corporations. Except to the extent
provided in Paragraphs 6(b) and 9(a), no Employee or Director
shall have a right to be granted an Award or, having received an
Award, the right to again be granted an Award. However, an
Employee or Director who has been granted an Award may, if
otherwise eligible, be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the State of Illinois, except to the extent that
federal law shall be deemed to apply.
A-13
<PAGE>
<PAGE>
Exhibit B
HEARTLAND 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 Heartland National 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.
B-1<PAGE>
<PAGE>
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 Heartland 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 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.
B-2<PAGE>
<PAGE>
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 an 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 re-
gulations relating to the Plan, and (v) to make other deter-
minations 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
B-3<PAGE>
<PAGE>
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 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. 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 of Common Stock issued
on the Date of Conversion. Such Shares may either be authorized
but unissued Shares, Shares repurchased by the Plan or an
associated trust on the open market, or Shares held in treasury.
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.
B-4<PAGE>
<PAGE>
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Only Employees shall be eligible to
receive Plan Share Awards. In selecting those Employees to whom
Plan Share Awards will be granted and the number of shares
covered by such Awards, the Committee shall consider the
position, duties and responsibilities of the eligible Employees,
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.
6.02 ALLOCATIONS. The Committee will determine which
Employees 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 Company 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 Employees 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) 30 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.
B-5<PAGE>
<PAGE>
Each Director who joins the Board after the Effective Date shall
receive, on said date, a Plan Share Award of two percent (2%) of
the number of Plan Shares which the Trust is authorized to
purchase pursuant to Section 5.02 of the Plan (or such lesser
number as are available hereunder for Plan Share Awards). 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:
Percentage of Plan Shares Authorized
Employee for Purchase under Plan Subsection 5.02
-------- ---------------------------------------
Roger O. Hileman 25.0%
Christy L. Cripps 12.5%
Ronald D. Maddox 12.5%
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.
B-6<PAGE>
<PAGE>
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 non-
forfeitable by a Participant upon his or her completion of each
of five Years of Service.
(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.
(c) SIX-MONTH HOLDING PERIOD. In no event may Plan Shares
be sold within the six-month period following the date of the
underlying Plan Share Award, except in the event of the
Participant's death or Disability, or such other event as the
Board may specifically deem appropriate.
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 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 distributed. There shall also be distributed an
appropriate amount of net earnings, if any, of the Trust with
respect to any cash dividends paid pursuant to this Section 7.02.
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.
(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
B-7<PAGE>
<PAGE>
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 such Plan Shares, the cash
equivalent thereof. 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.
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, recapitaliza-
tion, 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
B-8<PAGE>
<PAGE>
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 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 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.
B-9<PAGE>
<PAGE>
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 Illinois 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. In no event shall
Plan Share Awards be made prior to the Effective Date.
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).
B-10<PAGE>
<PAGE>
REVOCABLE PROXY
HEARTLAND BANCSHARES, INC.
HERRIN, ILLINOIS
_________________________________________________________________
SPECIAL MEETING OF STOCKHOLDERS
January 28, 1997
_________________________________________________________________
The undersigned hereby appoints James C. Walker, B.D. Cross
and Randall A. Youngblood, with full powers of substitution, to
act as proxies for the undersigned, to vote all shares of common
stock of Heartland Bancshares, Inc. (the "Company") which the
undersigned is entitled to vote at the Special Meeting of
Stockholders (the "Meeting"), to be held at the Herrin Civic
Center, 101 South 16th Street, Herrin, Illinois, on Tuesday,
January 28, 1997 at 2:00 p.m., local time, and at any and all
adjournments thereof, as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
1. Approval of the Heartland
Bancshares, Inc. 1996 Stock Option
and Incentive Plan. [ ] [ ] [ ]
2. Approval of the Heartland Bancshares,
Inc. Management Recognition Plan. [ ] [ ] [ ]
</TABLE>
The Board of Directors recommends a vote "FOR" the listed
proposition.
_________________________________________________________________
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED ABOVE. IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING,
THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN
ACCORDANCE WITH THE DETERMINATION OF THE BOARD OF DIRECTORS. AT
THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER
BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO MATTERS INCIDENT TO THE CONDUCT OF THE MEETING.
_________________________________________________________________<PAGE>
<PAGE>
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Should the undersigned be present and elect to vote at the
Meeting or at any adjournment thereof and after notification to
the Secretary of the Company at the Meeting of the stockholder's
decision to terminate this proxy, then the power of said
attorneys and proxies shall be deemed terminated and of no
further force and effect.
The undersigned acknowledges receipt from the Company prior
to the execution of this proxy of a Notice of Special Meeting of
Stockholders, a proxy statement dated December 27, 1996.
Dated: _______________________, 1996
__________________________ __________________________
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER
__________________________ __________________________
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER
Please sign exactly as your name appears on the envelope in which
this card was mailed. When signing as attorney, executor, admin-
istrator, trustee or guardian, please give your full title. If
shares are held jointly, each holder should sign.
_________________________________________________________________
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PREPAID ENVELOPE.
_________________________________________________________________
