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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
HBancorporation, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
___________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
___________________________________________________________________________
3) Filing Party:
___________________________________________________________________________
4) Date Filed:
___________________________________________________________________________
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[HBANCORPORATION, INC. LETTERHEAD]
March 24, 1997
Dear Fellow Stockholder:
On behalf of the Board of Directors and management of HBancorporation,
Inc. (the "Company"), I cordially invite you to attend the Special Meeting of
Stockholders. The meeting will be held at 10:00 a.m. on April 28, 1997 at the
Elks Lodge located at 519 12th Street, Lawrenceville, Illinois.
An important aspect of the meeting process is the stockholder vote on
corporate business items. I urge you to exercise your rights as a stockholder to
vote and participate in this process. Stockholders are being asked to consider
and vote upon proposals to ratify the adoption of the 1997 Stock Option and
Incentive Plan and the Recognition and Retention Plan. The Board has carefully
considered both of these proposals and believes that their approval will enhance
the ability of the Company to recruit and retain quality directors and
management. Accordingly, your Board of Directors unanimously recommends that you
vote "For" both of the proposals.
We encourage you to attend the meeting in person. Whether or not you
plan to attend, however, please read the enclosed Proxy Statement and then
complete, sign and date the enclosed proxy card and return it in the
accompanying postpaid return envelope as promptly as possible. This will save
the Company additional expense in soliciting proxies and will ensure that your
shares are represented at the meeting.
Sincerely,
KEVIN J. KAVANAUGH
President and Chief Executive Officer
<PAGE>
HBancorporation, Inc.
619 12th Street
Lawrenceville, Illinois 62439
(618) 943-2515
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be Held on April 28, 1997
Notice is hereby given that the Special Meeting of Stockholders (the
"Meeting") of HBancorporation (the "Company") will be held at the Elks Lodge
located at 519 12th Street, Lawrenceville, Illinois at 10:00 a.m.,
Lawrenceville, Illinois time, on April 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. The ratification of the adoption of the Company's 1997 Stock Option
and Incentive Plan;
2. The ratification of the adoption of the Company's Recognition and
Retention Plan;
and 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 the foregoing proposals at the Meeting on
the date specified above, or on any date or dates to which the Meeting may be
adjourned. Stockholders of record at the close of business on March 17, 1997 are
the stockholders entitled to vote at the Meeting and any adjournments thereof.
A complete list of stockholders entitled to vote at the Meeting will be
available for inspection by stockholders at the offices of the Company during
the ten days prior to the Meeting as well as at the Meeting.
You are requested to complete and sign the enclosed form of proxy,
which is solicited on behalf of 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
Kevin J. Kavanaugh
President and Chief Executive Officer
Lawrenceville, Illinois
March 24, 1997
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IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. A SELF-
ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED
IF MAILED WITHIN THE UNITED STATES.
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<PAGE>
PROXY STATEMENT
HBancorporation, Inc.
619 12th Street
Lawrenceville, Illinois 62439
(618) 943-2515
SPECIAL MEETING OF STOCKHOLDERS
April 28, 1997
This Proxy Statement is furnished in connection with the solicitation
on behalf of the Board of Directors of HBancorporation, Inc. (the "Company"),
the parent company of Heritage National Bank (the "Bank"), of proxies to be used
at the Special Meeting of Stockholders of the Company (the "Meeting") which will
be held at the Elks Lodge located at 519 12th Street, Lawrenceville, Illinois on
April 28, 1997, at 10:00 a.m., Lawrenceville, Illinois time, and all
adjournments of the Meeting. The accompanying Notice of Annual Meeting and this
Proxy Statement are first being mailed to stockholders on or about March 24,
1997.
At the Meeting, stockholders of the Company are being asked to consider
and vote upon proposals to ratify the adoption of the HBancorporation, Inc. 1997
Stock Option and Incentive Plan (the "Stock Option Plan") and the
HBancorporation, Inc. Recognition and Retention Plan (the "RRP").
Vote Required and Proxy Information
All shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), represented at the Meeting by properly executed proxies
received prior to or at the Meeting, and not revoked, will be voted at the
Meeting in accordance with the instructions thereon. If no instructions are
indicated, properly executed proxies will be voted for the director nominee and
the proposals set forth in this Proxy Statement. The Company does not know of
any matters, other than as described in the Notice of Annual Meeting, that are
to come before the Meeting. If any other matters are properly presented at the
Meeting for action, the persons named in the enclosed form of proxy and acting
thereunder will have the discretion to vote on such matters in accordance with
their best judgment.
The affirmative vote by the holders of a majority of votes cast at the
meeting shall be the act of the stockholders. Proxies marked to abstain with
respect to a proposal and broker non-votes have the same effect as votes against
the proposal. One-third of the shares of the Common Stock, present in person or
represented by proxy, shall constitute a quorum for purposes of the Meeting.
Abstentions and broker non-votes are counted for purposes of determining a
quorum.
A proxy given pursuant to the solicitation may be revoked at any time
before it is voted. Proxies may be revoked by: (i) filing with the Secretary of
the Company at or before the Meeting a written notice of revocation bearing a
later date than the proxy, (ii) duly executing a subsequent proxy relating to
the same shares and delivering it to the Secretary of the Company at or before
the Meeting, or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute revocation of a
proxy). Any written notice revoking a proxy should be delivered to Secretary,
HBancorporation, Inc., 619 12th Street, Lawrenceville, Illinois 62439.
Voting Securities and Certain Holders Thereof
Stockholders of record as of the close of business on March 17, 1997
will be entitled to one vote for each share of Common Stock then held. As of
that date, the Company had 493,320 shares of Common Stock issued and
outstanding. The following table sets forth information regarding share
ownership of those persons or entities known by management to beneficially own
more than five percent of the Common Stock and all directors and executive
officers of the Company and the Bank as a group.
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<TABLE>
<CAPTION>
Shares
Beneficially Percent
Beneficial Owner Owned of Class
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<S> <C> <C>
HBancorporation, Inc. Employee Stock Ownership Plan 39,465(1) 8.0%
619 12th Street
Lawrenceville, Illinois 62439
Kevin J. Kavanaugh, Chairman of Board, President and 17,150 3.5
Chief Executive Officer of the Company and the Bank
John H. White, Director of the Company and the Bank 10,000 2.0
L. Patrick Kavanaugh, Director of the Company and the Bank 15,000 3.0
Mary E. Denison, Director of the Company and the Bank 10,000 2.0
Robert R. Ernst, Director of the Company and the Bank 5,000 1.0
James W. Steed, Director of the Company and the Bank 10,000 2.0
Jeffrey S. Halis 49,000 9.9
500 Park Avenue
Fifth Floor
New York, New York 10022(3)
Santa Monica Partners, L.P. 32,350 6.6
2 Madison Avenue
Larchmont, New York 10538(4)
Directors and executive officers of the Company and the Bank, 67,150(2) 13.6
as a group (6 persons)
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</TABLE>
(1) The amount reported represents shares held by the Employee Stock Ownership
Plan ("ESOP"), 1,981 of which have been allocated to accounts of
participants as of the voting record date. First Bankers Trust Company,
N.A., Quincy, Illinois, the trustee of the ESOP, may be deemed to
beneficially own the shares held by the ESOP which have not been allocated
to accounts of participants. Participants in the ESOP are entitled to
instruct the trustee as to the voting of shares allocated to their accounts
under the ESOP. Unallocated shares held in the ESOP's suspense account or
allocated shares for which no voting instructions are received are voted by
the trustee in the same proportion as allocated shares voted by
participants.
(2) Amount includes shares held directly, as well as shares held jointly with
family members, shares held in retirement accounts, shares allocated to the
ESOP accounts of the group members, held in a fiduciary capacity or by
certain family members, with respect to which shares the group members may
be deemed to have sole voting and/or investment power.
(3) As reported on Schedule 13D dated April 1, 1996.
(4) As reported on Schedule 13D dated May 10, 1996.
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Director Compensation
The Board of Directors of the Company are not paid for their service in
such capacity. Compensation of the Bank's directors is described below.
Each director of the Bank is currently paid a fee of $300 for each
regular or special meeting attended. Directors do not receive compensation for
committee participation.
For proposed awards to directors under the Stock Option Plan and RRP,
see "Proposal I - Ratification of the 1997 Stock Option and Incentive Plan -
Awards Under the Stock Option Plan" and "Proposal II - Ratification of the
Recognition and Retention Plan - Awards Under the RRP."
Executive Compensation
The Company has not paid any compensation to its executive officers
since its formation. The Company does not presently anticipate paying any
compensation to such persons until it becomes actively involved in the operation
or acquisition of businesses other than the Bank.
The following table sets forth information concerning the compensation
paid or accrued by the Bank for services rendered by the Bank's Chief Executive
Officer. No executive officer of the Bank had aggregate compensation (salary
plus bonus) in excess of $100,000 in fiscal 1996.
<TABLE>
<CAPTION>
====================================================================================================================
Summary Compensation Table
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Long-Term Compensation
Annual Compensation Awards
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Other Annual Restricted All Other
Fiscal Salary Bonus Compensation Stock Options/ Compensation
Name and Principal Position Year ($)(1) ($) ($) Award ($) SARs (#) ($)
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<S> <C> <C> <C> <C> <C> <C> <C>
Kevin J. Kavanaugh, 1996 $75,924 $7,051 $ --- --- --- $14,285(2)
President and Chief Executive 1995 $74,591 $8,280 $ --- --- --- $14,210(3)
Officer 1994 $69,972 $9,269 $ --- --- --- $13,804(4)
====================================================================================================================
</TABLE>
(1) Includes $3,600 in fees received as a director in fiscal years 1996 and 1995
and $3,000 in fees as a director in fiscal year 1994.
(2) Includes $2,319 of life, health and disability premiums paid by the Bank and
$11,891 paid by the Bank in discretionary contributions pursuant to the
Bank's Simplified Employee Pension.
(3) Includes $2,379 of life, health and disability premiums paid by the Bank and
$11,906 paid by the Bank in discretionary contributions pursuant to the
Bank's Simplified Employee Pension.
(4) Includes $2,368 of life, health and disability premiums paid by the Bank and
$11,436 paid by the Bank in discretionary contributions pursuant to the
Bank's Simplified Employee Pension.
Employment Agreement
The Bank has entered into an employment agreement with President
Kavanaugh. The employment agreement is designed to assist the Bank in
maintaining a stable and competent management team. The continued success of the
Bank depends to a significant degree on the skills and competence of its
officers. The employment agreement provides for an annual base salary in an
amount not less than the employee's current salary and an initial term of three
years. The agreement provides for extensions of one year, in addition to the
then-remaining term under the agreement, on each anniversary of the effective
date of the agreement, subject to a formal performance evaluation performed by
disinterested members of the Board of Directors of the Bank. The agreement
provides for termination upon the employee's death, for cause or in certain
events specified by the agreement. The employment agreement is terminable by the
employee upon 90 days' notice to the Bank.
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The employment agreement provides for continued health benefits for the
remaining term of the agreement and payment to the employee of 299% of the
employee's base amount of compensation in the event there is a "change in
control" of the Bank where employment terminates involuntarily in connection
with such change in control or within 12 months thereafter. This termination
payment is subject to reduction in order to avoid certain adverse tax
consequences. For the purposes of the employment agreement, a "change in
control" is defined as including any event which would require the filing of an
application for acquisition of control or notice of change in control pursuant
to federal law or regulation. Such events are generally triggered prior to the
acquisition or control of 10% of the Common Stock. The agreement guarantees
participation in an equitable manner in employee benefits applicable to
executive personnel.
Based on his current salary, if Mr. Kavanaugh's employment had been
terminated as of the fiscal year ended June 30, 1996, under circumstances
entitling him to severance pay as described above, he would have been entitled
to receive a lump sum cash payment of approximately $240,000.
PROPOSAL I - RATIFICATION OF THE 1997 STOCK OPTION AND INCENTIVE PLAN
General
Establishment and implementation of the Stock Option Plan is subject to
ratification by stockholders
The Stock Option Plan has been adopted by the Board of Directors of the
Company, subject to ratification by stockholders at the Meeting. Ratification by
stockholders of the adoption of the Stock Option Plan will ratify the awards
proposed thereunder and as described in "Awards Under the Stock Option Plan"
below, and will ratify the granting of additional awards pursuant to the
provisions of the Stock Option Plan. Pursuant to the Stock Option Plan, the
Company will reserve for issuance thereunder either from authorized but unissued
shares or from issued shares reacquired and held as treasury shares, 59,198
shares of the Common Stock (12.0% of the Company's current shares outstanding).
Management currently intends, to the extent practicable and feasible, to fund
the Stock Option Plan from issued shares reacquired by the Company in the open
market. To the extent the Company utilizes authorized but unissued Common Stock
to fund the Stock Option Plan, the exercise of stock options will have the
effect of diluting the holdings of persons who own Common Stock. Assuming all
options under the Stock Option Plan are awarded and exercised through the use of
authorized but unissued Common Stock, current stockholders would be diluted by
approximately 10.7%. Upon ratification of the Stock Option Plan by stockholders,
options to purchase an aggregate of34,198 shares of Common Stock will be
awarded, which will leave available 25,000 shares for future awards.
The Board of Directors believes that it is appropriate for the Company
to adopt a flexible and comprehensive Stock Option Plan which permits the
granting of a variety of long-term incentive awards to directors, advisory
directors, officers and employees as a means of enhancing and encouraging the
recruitment and retention of those individuals on whom the continued success of
the Company most depends. However, because the awards are granted only to
persons affiliated with the Company, the adoption of the Stock Option Plan could
make it more difficult for a third party to acquire control of the Company and
therefore could discourage offers for the Company's stock that may be viewed by
the Company's stockholders to be in their best interest. In addition, certain
provisions included in the Company's Certificate of Incorporation and Bylaws may
discourage potential takeover attempts, particularly those that have not been
negotiated directly with the Board of Directors of the Company. Included among
these provisions are provisions (i) limiting the voting power of shares held by
persons owning 10% or more of the Common Stock, (ii) requiring a supermajority
vote of stockholders for approval of certain business combinations, (iii)
establishing a staggered Board of Directors, (iv) permitting special meetings of
stockholders to be called only by the Board of Directors and (v) authorizing a
class of preferred stock with terms to be established by the Board of Directors.
These provisions could prevent the sale or merger of the Company even where a
majority of the stockholders approve of such transaction. In addition, federal
regulations prohibit the beneficial ownership of more than 10% of the stock of
the Company without prior approval of the Board of Governors of the Federal
Reserve System ("FRB"). These regulations could have the effect of discouraging
takeover attempts of the Company.
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Attached as Exhibit A to this Proxy Statement is the complete text of
the Stock Option Plan. The principal features of the Stock Option Plan are
summarized below.
Principal Features of the Stock Option Plan
The Stock Option Plan provides for awards in the form of stock options,
stock appreciation rights ("SARs") and limited stock appreciation rights
("Limited SARs"). Each award shall be on such terms and conditions, consistent
with the Stock Option Plan, as the committee administering the Stock Option Plan
may determine. Subject to certain exceptions described herein, awards made under
such plan vest at a rate of one-fifth of the initial award per year, subject to
the participant maintaining continuous service since the date of grant.
Shares may be either authorized but unissued shares or reacquired
shares held by the Company in its treasury. Any shares subject to an award which
expires or is terminated unexercised will again be available for issuance under
the Stock Option Plan or any other plan of the Company or its subsidiaries.
Generally, no award or any right or interest therein is assignable or
transferable except under certain limited exceptions set forth in the Stock
Option Plan.
The Stock Option Plan is administered by the Compensation Committee of
the Board of Directors of the Company (the "Compensation Committee"), which is
comprised of non-employee directors of the Company. Directors Steed, Denison and
L.P. Kavanaugh have been appointed as the present members of the Compensation
Committee. Pursuant to the terms of the Stock Option Plan, any director,
advisory director, officer or employee of the Company or its affiliates is
eligible to participate in the Stock Option Plan, which currently includes
approximately 10 persons. In granting awards under the Stock Option Plan, the
Compensation Committee considers, among other things, position and years of
service, value of the participant's services to the Company and the Bank and the
added responsibilities of such individuals as employees, directors and officers
of a public company.
Stock Options
The term of stock options will not exceed ten years from the date of
grant. The Committee may grant either "incentive stock options" as defined under
Section 422 of the Code or stock options not intended to qualify as such
("non-qualified stock options").
In general, stock options will not be exercisable after the expiration
of their terms. Unless otherwise determined by the Committee, in the event a
participant ceases to maintain continuous service (as defined in the Stock
Option Plan) with the Company or one of its affiliates, for any reason
(including death or disability but excluding termination for cause), an
exercisable stock option will continue to be exercisable for three months
thereafter but in no event after the expiration date of the option. If a
participant to whom an option was granted ceases to maintain continuous service
by reason of death or disability, all options not then exercisable shall become
exercisable in full for the three-month and one-year periods described below. In
the event of the death of a participant during such service or within the
three-month period described above following termination, an exercisable option
will continue to be exercisable for one year, to the extent exercisable by the
participant immediately prior to his death, but in no event later than ten years
after grant. Following the death of any participant, the Committee may, as an
alternative means of settlement of an option, elect to pay to the holder thereof
an amount of cash equal to the amount by which the market value of the shares
covered by the option on the date of exercise exceeds the exercise price. A
stock option will automatically terminate and will no longer be exercisable as
of the date a participant is notified of termination for cause.
The exercise price for the purchase of shares subject to a stock option
at the date of grant may not be less than 100% of the market value of the shares
covered by the option on on the date of grant of such stock options. The
exercise price must be paid in full in cash or shares of Common Stock, or a
combination of both.
The Stock Option Plan provides for the grant of a non-qualified stock
option to purchase 2,500 shares of Common Stock to each director who is not an
employee of the Company, as of the date of stockholder ratification of the Stock
Option Plan. Such options have a term of ten years, are not transferable and
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vest at the rate of 20% per year commencing from the date of grant of the stock
option. The exercise price per share of the options shall be equal to the fair
market value of the Common Stock on the date of grant of such stock option.
Stock Appreciation Rights
The Committee may grant SARs at any time, whether or not the
participant then holds stock options, granting the right to receive the excess
of the market value of the shares represented by the SARs on the date exercised
over the exercise price. SARs generally will be subject to the same terms and
conditions and exercisable to the same extent as stock options, as described
above. Upon the exercise of a SAR, the participant will receive the amount due
in cash or shares, or a combination of both, as determined by the Committee.
SARs may be related to stock options ("tandem SARs"), in which case the exercise
of one will reduce to that extent the number of shares represented by the other.
Notwithstanding the foregoing, no SAR may be exercisable by a director, Senior
Officer or Ten Percent Beneficial owner of the Company within six months of the
date of its grant.
"Senior Officer" means the Company's president, principal financial
officer or principal accounting officer, any vice president of the Company in
charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of the Company's affiliates shall be deemed Senior
Officers of the Company if they perform such policy-making functions for the
Company. "Ten Percent Beneficial Owner" means the beneficial owner of more than
ten percent of any class of the Company's equity securities registered pursuant
to Section 12 of the Securities Exchange Act of 1934.
SARs will require an expense accrual by the Company each year for the
appreciation on the SARs which it is anticipated will be exercised. The amount
of the accrual is dependent upon whether and the extent to which the SARs are
granted and the amount, if any, by which the market value of the SARs exceeds
the exercise price.
Limited Stock Appreciation Rights
Limited SARs will be exercisable only for a limited period in the event
of a tender or exchange offer for shares of the Company's Common Stock, other
than by the Company, where 25% or more of the outstanding shares are acquired in
that offer or any other offer which expires within 60 days of that offer. The
amount paid on exercise of a Limited SAR will be the excess of (a) the market
value of the shares on the date of exercise, or (b) the highest price paid
pursuant to the offer, over the exercise price. Payment upon exercise of a
Limited SAR will be in cash.
Limited SARs may be granted at the time of, and must be related to, the
grant of a stock option or SAR. The exercise of one will reduce to that extent
the number of shares represented by the other. Subject to vesting, Limited SARs
will be exercisable only for the 45 days following the expiration of the tender
or exchange offer, during which period the related stock option or SAR will be
exercisable. However, no Limited SAR will be exercisable by a director, Senior
Officer or Ten Percent Beneficial Owner of the Company within six months of the
date of its grant.
Effect of Change in Control and Other Adjustments
The restricted period with respect to options granted pursuant to the
Stock Option Plan will laspe, and the stock options will be earned, in the event
a recipient is terminated at any time within 12 months of a change in control of
the Company or the Bank. A change in control will be deemed to occur when (i) a
person or group becomes the beneficial owner of the shares of the Company or the
Bank representing 25% or more of the total number of votes which may be cast for
the election of the Board of Directors of the Company or the Bank, (ii) in
connection with any tender or exchange offer (other than an offer by the Company
or the Bank), merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the person who were directors of the
Company or the Bank cease to be a majority of the Board of Directors, or (iii)
stockholders of the Company or the Bank approve a transaction prusuant to which
substantially all of the assets of the Company or the Bank will be sold.
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Shares as to which awards may be granted under the Stock Option Plan,
and shares then subject to awards, will be adjusted appropriately by the
Committee in the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure or Common Stock of the Company.
In the event of any merger, consolidation or combination of the Company
with or into another financial institution holding company or other entity,
whereby either the Company is not the continuing entity or its outstanding
shares of Common Stock are converted into or exchanged for different securities,
cash or property, or any combination thereof, pursuant to a plan or agreement
the terms of which are binding upon all stockholders, any participant to whom a
stock option, SAR or Limited SAR has been granted at least six months prior to
such event will have the right upon exercise of the option, SAR or Limited SAR
(subject to the terms of the Stock Option Plan and any other applicable
limitation) to an amount equal to the excess of fair market value on the date of
exercise of the consideration receivable in the merger, consolidation or
combination with respect to the shares covered or represented by the stock
option, SAR or Limited SAR over the exercise price of the option, SAR or Limited
SAR multiplied by the number of shares with respect to which the option, SAR or
Limited SAR has been exercised.
Amendment and Termination
The Board of Directors of the Company may at any time amend, suspend or
terminate the Stock Option Plan or any portion thereof but may not, without the
prior ratification of the stockholders, make any amendment which shall (i)
increase the aggregate number of securities which may be issued under the Stock
Option Plan (except as specifically set forth under the Stock Option Plan), (ii)
materially increase the benefits accruing to participants, (iii) materially
change the requirements as to eligibility for participation in the Stock Option
Plan or (iv) change the class of persons eligible to participate in the Stock
Option Plan, provided, however, that no such amendment, suspension or
termination shall impair the rights of any participant, without his consent, in
any award made pursuant to the Stock Option Plan. Unless previously terminated,
the Stock Option Plan shall continue in effect for a term of ten years, after
which no further awards may be granted under the Stock Option Plan.
Federal Income Tax Consequences
Under present federal income tax laws, awards under the Stock Option
Plan will have the following consequences:
(1) The grant of an award will neither, by itself, result in the
recognition of taxable income to the participant nor entitle the Company to a
deduction at the time of such grant.
(2) The exercise of a stock option which is an "Incentive Stock Option"
within the meaning of Section 422 of the Code will generally not, by itself,
result in the recognition of taxable income to the participant nor entitle the
Company to a deduction at the time of such exercise. However, the difference
between the exercise price and the fair market value of the option shares on the
date of exercise is an item of tax preference which may, in certain situations,
trigger the alternative minimum tax. The alternative minimum tax is incurred
only when it exceeds the regular income tax. The alternative minimum tax will be
payable at the rate of 26% on the first $175,000 of "minimum taxable income"
above the exemption amount ($33,750 for single individual and $45,000 for
married individuals filing jointly), and 28% on minimum taxable income more than
$175,000 above the exemption amounts. If a taxpayer has alternative minimum
taxable income in excess of $150,000 (married individuals filing jointly) or
$112,500 (single individual), the $45,000 or $33,750 exemptions are reduced by
an amount equal to 25% of the amount by which the alternative minimum taxable
income of the taxpayer exceeds $150,000 or $112,500, respectively. The
participant will recognize long-term capital gain or loss upon resale of the
shares received upon such exercise, provided that the participant holds the
shares for more than one year following exercise.
(3) The exercise of a stock option which is not an Incentive Stock
Option will result in the recognition of ordinary income by the participant on
the date of exercise in an amount equal to the difference between the exercise
price and the fair market value on the date of exercise of the shares acquired
pursuant to the stock option.
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(4) The exercise of a SAR will result in the recognition of ordinary
income by the participant on the date of exercise in an amount of cash, and/or
the fair market value on that date of the shares, acquired pursuant to the
exercise.
(5) The Company will be allowed a deduction at the time, and in the
amount of, any ordinary income recognized by the participant under the various
circumstances described above, provided that the Company meets its federal
withholding tax obligations.
Awards Under the Stock Option Plan
The following table presents information at March 17, 1997, with respect
to the number of awards of options which are intended to be granted under the
Stock Option Plan, subject to stockholder ratification of the Stock Option Plan,
to (i) Mr. Kavanaugh, the only executive officer and employee to be awarded
options under the Stock Option Plan, and (ii) directors who are not executive
officers of the Company and the Bank as a group. On March 17, 1997, the average
of the closing bid and asked prices for the Common Stock as quoted on the "pink
sheets" published by the National Quotation Bureau, Inc. was $13.125 per share.
<TABLE>
<CAPTION>
====================================================================================================================
1997 STOCK OPTION AND INCENTIVE PLAN
- --------------------------------------------------------------------------------------------------------------------
Name and Position Dollar Value(1) Number of Shares
====================================================================================================================
<S> <C> <C>
Kevin J. Kavanaugh, Chairman of the Board, President and
Chief Executive Officer.............................................. $ --- 12,500
Non-Executive Officer Director Group (5 persons)....................... --- 12,500
====================================================================================================================
</TABLE>
- ------------
(1) Any value realized will be the difference between the exercise price and the
market value upon exercise. Since the options have not been granted, there
is no current value.
Subject to the conditions of the Stock Option Plan, the proposed awards
described in the preceding table will vest in five equal annual installments
with the first installment immediately vesting on the date of stockholder
ratification of the Stock Option Plan and the additional installments vesting
ratably on the four subsequent anniversaries of the date of stockholder
ratification of the Stock Option Plan. All options are required to be granted
with an exercise price equal to the fair market value of the shares on the date
of grant of such stock option.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE 1997 STOCK OPTION AND INCENTIVE PLAN.
PROPOSAL II - RATIFICATION OF THE RECOGNITION AND RETENTION PLAN
General
Establishment and implementation of the Recognition and Retention Plan
("RRP") is subject to ratification by stockholders
The RRP has been adopted by the Board of Directors of the Company,
subject to stockholder ratification. The RRP is designed to provide directors,
officers and employees with a proprietary interest in the Company in a manner
designed to encourage such individuals to remain with the Company and the Bank.
Ratification by stockholders of the adoption of the RRP will ratify the awards
proposed thereunder and as described in "Awards under the RRP" below, and will
ratify the granting of additional restricted stock awards pursuant to the
8
<PAGE>
provisions of the RRP. Pursuant to the RRP, 24,666 shares of Common Stock (or
5.0% of the current outstanding shares of the Company), funded from either
authorized but unissued shares or issued shares subsequently reacquired and held
as treasury shares, will be available for awards. Management currently intends,
to the extent practicable and feasible, to fund the RRP from issued shares
reacquired by the Company in the open market. To the extent the Company utilizes
authorized but unissued shares to fund the RRP the interests of current
stockholders will be diluted. Assuming all RRP Shares are awarded through the
use of authorized but unissued common Stock, current stockholders would be
diluted by approximately 4.8%. Upon ratification of the RRP by stockholders, an
aggregate of 12,000 shares of Common Stock will be awarded to directors,
officers and employees of the Company and the Bank, which will leave 12,666
shares available for future awards.
Attached as Exhibit B to this Proxy Statement is the complete text of
the form of the RRP. The principal features of the RRP are summarized below.
Principle Features of the RRP
The RRP provides for the award of shares of Common Stock ("RRP Shares")
subject to the restrictions described below. Each award under the RRP will be
made on such terms and conditions, consistent with the RRP, as the Compensation
Committee shall determine.
The RRP is administered by the Company's Compensation Committee. The
Compensation Committee will select the recipients and terms of awards pursuant
to the RRP. See "Proposal I - Ratification of the 1997 Stock Option and
Incentive Plan." In determining to whom and in what amount to grant awards, the
Compensation Committee considers the position and responsibilities of eligible
individuals, the value of their services to the Company and the Bank and other
factors it deems relevant. Pursuant to the terms of the RRP, any director,
advisory director, officer or employee of the Company or its affiliates may be
selected by the Compensation Committee to participate in the RRP, which
currently includes eligible participants of approximately 10 persons.
The RRP provides that RRP Shares used to fund awards under the RRP may
be either authorized but unissued shares or reacquired shares held by the
Company in its treasury. Any RRP Shares which are forfeited will again be
available for issuance under the RRP or any other plan of the Company or its
subsidiaries.
RRP award recipients earn (i.e., become vested in) awards, over a
period of time as determined by the Compensation Committee, at the time of
grant. RRP Shares to be awarded in 1997 to directors, officers and employees
will vest in five equal annual installments, with the first installment vesting
immediately upon the date of ratification of the RRP by the Company's
stockholders, subject to the conditions described below. RRP Shares are subject
to forfeiture if the recipient fails to remain in the continuous service (as
defined in the RRP) as an employee, officer or director (including advisory
directors) of the Company or the Bank for a stipulated period (the "restricted
period"). Vested shares are distributed to recipients as soon as practicable
following the date on which they are earned.
The Compensation Committee may, in its discretion, accelerate the time
at which any or all restrictions will lapse, or may remove any or all of the
restrictions. In the event a recipient ceases to maintain continuous service
with the Company or the Bank by reason of death or disability, RRP Shares still
subject to restrictions will be free of these restrictions and shall not be
forfeited. In the event of termination for any other reason, all shares will be
forfeited and returned to the Company.
Holders of RRP Shares may not vote or sell, assign, transfer, pledge or
otherwise encumber any of the RRP Shares during the restricted period. All
dividends declared or paid on RRP shares, including those RRP shares still
subject to restrictions, will be paid to the participant.
Finally, the RRP provides for an award of 1,200 RRP Shares to each
director who is not an employee of the Company, as of the date of stockholder
ratification of the RRP.
9
<PAGE>
Adjustments Upon Changes in Capitalization
The restricted period with respect to shares granted pursuant to the
RRP will laspe, and the stock will be earned, in the event a recipient is
terminated at any time within 12 months of a change in control of the Company or
the Bank. A change in control will be deemed to occur when (i) a person or group
becomes the beneficial owner of the shares of the Company or the Bank
representing 25% or more of the total number of votes which may be cast for the
election of the Board of Directors of the Company or the Bank, (ii) in
connection with any tender or exchange offer (other than an offer by the Company
or the Bank), merger or other business combination, sale of assets or contested
election, or combination of the foregoing, the person who were directors of the
Company or the Bank cease to be a majority of the Board of Directors, or (iii)
stockholders of the Company or the Bank approve a transaction prusuant to which
substantially all of the assets of the Company or the Bank will be sold.
RRP Shares awarded under the RRP will be adjusted by the Compensation
Committee in the event of a reorganization, recapitalization, stock split, stock
dividend, combination or exchange of shares, merger or other change in corporate
structure or the Common Stock of the Company.
Federal Income Tax Consequences
Holders of RRP Shares will recognize ordinary income on the date that
the RRP Shares are no longer subject to a substantial risk of forfeiture, in an
amount equal to the fair market value of the shares on that date. In certain
circumstances, a holder may elect to recognize ordinary income and determine
such fair market value on the date of the grant of the restricted stock. Holders
of RRP Shares will also recognize ordinary income equal to their dividend or
dividend equivalent payments when such payments are received.
Amendment to the RRP
The Board of Directors of the Company may amend, suspend or terminate
the RRP or any portion thereof at any time, provided however, that no such
amendment, suspension or termination shall materially impair the rights of any
participant, without his or her consent, in any award made pursuant to the RRP.
Notwithstanding anything in the RRP to the contrary, such provisions may not be
amended more than once every six months, other than to comport with changes in
the Code, ERISA or the rules thereunder.
Awards Under the RRP
The following table presents information at March 17, 1997, with
respect to the number of shares of restricted stock which are intended to be
granted under the RRP, subject to stockholder ratification of the RRP, to (i)
Mr. K. Kavanaugh, the only executive officer and employee awarded shares under
the RRP, and (ii) directors who are not executive officers of the Company or the
Bank as a group.
<TABLE>
<CAPTION>
====================================================================================================================
RECOGNITION AND RETENTION PLAN
- --------------------------------------------------------------------------------------------------------------------
Name and Position Dollar value(1) Shares of Restricted Stock
====================================================================================================================
<S> <C> <C>
Kevin J. Kavanaugh, Chairman of the Board, President and
Chief Executive Officer.......................................... $78,750 6,000
Non-Executive Officer Director Group (5 persons)................... 78,750 6,000
====================================================================================================================
</TABLE>
- ------------
(1) Assumes an aggregate market value of the shares of restricted stock based on
the average of the closing bid and asked prices of the Common Stock of
$13.125 as reported on the "pink sheets" published by the National Quotation
Bureau, Inc. on March 17, 1997.
10
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE ADOPTION OF THE RECOGNITION AND RETENTION PLAN.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy materials
for the 1997 annual meeting of stockholders, any stockholder proposal to take
action at such meeting must be received at the Company's office located at 619
12th Street, Lawrenceville, Illinois 62439, no later than May 31, 1997. Any such
proposal shall be subject to the requirements of the proxy rules adopted under
the Exchange Act.
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 matter should properly come before the Meeting, it is
intended that holders of the proxies will act in accordance with their best
judgment.
The cost of solicitation of 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. The Company has retained Regan &
Associates, Inc. to assist in the solicitation of proxies for a fee of $2,750,
plus out-of-pocket expenses not to exceed $1,400. In addition to solicitation by
mail, directors, officers and regular employees of the Company and/or the Bank
may solicit proxies personally or by telegraph or telephone without additional
compensation.
Lawrenceville, Illinois
March 24, 1997
11
<PAGE>
HBANCORPORATION, INC.
1997 STOCK OPTION AND INCENTIVE PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining directors, officers and employees of the Corporation
and its Affiliates. It is intended that designated Options granted pursuant to
the provisions of this Plan to persons employed by the Corporation or its
Affiliates will qualify as Incentive Stock Options. Options granted to persons
who are not employees will be Non-Qualified Stock Options.
2. Definitions. The following definitions are applicable to the Plan:
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Bank" - means Heritage National Bank.
"Award" - means the grant of an Incentive Stock Option, a
Non-Qualified Stock Option, a Stock Appreciation Right, a Limited Stock
Appreciation Right, or of Restricted Stock, or any combination thereof, as
provided in the Plan.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 3
hereof.
"Continuous Service" - means the absence of any interruption
or termination of service as a director, advisory director, officer or employee
of the Corporation or an Affiliate, except that when used with respect to
persons granted an Incentive Option means the absence of any interruption or
termination of service as an employee of the Corporation or an Affiliate.
Service shall not be considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Corporation or in the case
of transfers between payroll locations of the Corporation or between the
Corporation, its parent, its subsidiaries or its suc essor. With respect to any
advisory director, continuous service shall plan mean availability to perform
such functions as may be required of the Bank's advisory directors.
"Corporation" - means HBancorporation, Inc., a Delaware
corporation.
"Employee" - means any person, including an officer or
director, who is employed by the Corporation or any Affiliate.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
"Exercise Price" - means (i) in the case of an Option, the
price per Share at which the Shares subject to such Option may be purchased upon
exercise of such Option and (ii) in the case of a Right, the price per Share
(other than the Market Value per Share on the date of exercise and the Offer
<PAGE>
Price per Share as defined in Section 10 hereof) which, upon grant, the
Committee determines shall be utilized in calculating the aggregate value which
a Participant shall be entitled to receive pursuant to Sections 9, 10 or 13
hereof upon exercise of such Right.
"Incentive Stock Option" - means an option to purchase Shares
granted by the Committee pursuant to Section 6 hereof which is subject to the
limitations and restrictions of Section 8 hereof and is intended to qualify
under Section 422 of the Code.
"Limited Stock Appreciation Right" - means a stock
appreciation right with respect to Shares granted by the Committee pursuant to
Sections 6 and 10 hereof.
"Market Value" - means the average of the high and low quoted
sales price on the date in question (or, if there is no reported sale on such
date, on the last preceding date on which any reported sale occurred) of a Share
on the Composite Tape for the New York Stock Exchange-Listed Stocks, or, if on
such date the Shares are not quoted on the Composite Tape, on the New York Stock
Exchange, or, if the Shares are not listed or admitted to trading on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Shares are listed or admitted
to trading, or, if the Shares are not listed or admitted to trading on any such
exchange, the mean between the closing high bid and low asked quotations with
respect to a Share on such date on the National Association of Securities
Dealers, Inc., Automated Quotations System, or any similar system then in use,
or, if no such quotations are available, the fair market value on such date of a
Share as the Committee shall determine.
"Non-Employee Director" - means a director who a) is not
currently an officer or employee of the Corporation; b) is not a former employee
of the Corporation who receives compensation for prior services (other than from
a tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Non-Qualified Stock Option" - means an option to purchase
Shares granted by the Committee pursuant to Section 6 hereof, which option is
not intended to qualify under Section 422(b) of the Code.
"Option" - means an Incentive Stock Option or a Non-Qualified
Stock Option.
"Participant" - means any director, officer or employee of the
Corporation or any Affiliate who is selected by the Committee to receive an
Award and any director or advisory director of the Corporation who is granted an
Award pursuant to Section 21 hereof.
"Plan" - means the 1997 Stock Option and Incentive Plan of the
Corporation.
A-2
<PAGE>
"Related" - means (i) in the case of a Right, a Right which is
granted in connection with, and to the extent exercisable, in whole or in part,
in lieu of, an Option or another Right and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right is exercisable, in whole
or in part, in lieu thereof has been granted.
"Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 11 hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions referred
to in Section 11 hereof, so long as such restrictions are in effect.
"Right" - means a Limited Stock Appreciation Right or a Stock
Appreciation Right.
"Shares" - means the shares of common stock of the
Corporation.
"Stock Appreciation Right" - means a stock appreciation right
with respect to Shares granted by the Committee pursuant to Sections 6 and 9
hereof.
3. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of Shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
4. Participation in Committee Awards. The Committee may select from
time to time Participants in the Plan from those directors (including advisory
directors), officers and employees, of the Corporation or its Affiliates who, in
the opinion of the Committee, have the capacity for contributing to the
successful performance of the Corporation or its Affiliates.
5. Shares Subject to Plan. Subject to adjustment by the operation of
Section 12 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 12% of the total issued and outstanding Shares of the
Corporation on the date of ratification of the Plan by the Corporation's
stockholders. The Shares with respect to which Awards may be made under the Plan
may be either authorized and unissued shares or issued shares heretofore or
A-3
<PAGE>
hereafter reacquired and held as treasury shares. Shares which are subject to
Related Rights and Related Options shall be counted only once in determining
whether the maximum number of Shares with respect to which Awards may be granted
under the Plan has been exceeded. An Award shall not be considered to have been
made under the Plan with respect to any Option or Right which terminates or with
respect to Restricted Stock which is forfeited, and new Awards may be granted
under the Plan with respect to the number of Shares as to which such termination
or forfeiture has occurred.
6. General Terms and Conditions of Options and Rights. The Committee
shall have full and complete authority and discretion, except as expressly
limited by the Plan, to grant Options and/or Rights and to provide the terms and
conditions (which need not be identical among Participants) thereof. In
particular, the Committee shall prescribe the following terms and conditions:
(i) the Exercise Price of any Option or Right, which shall not be less than the
Market Value per Share at the date of grant of such Option, (ii) the number of
Shares subject to, and the expiration date of, any Option or Right, which
expiration date shall not exceed ten years from the date of grant, (iii) the
manner, time and rate (cumulative or otherwise) of exercise of such Option or
Right, and (iv) the restrictions, if any, to be placed upon such Option or Right
or upon Shares which may be issued upon exercise of such Option or Right. The
Committee may, as a condition of granting any Option or Right, require that a
Participant agree not to thereafter exercise one or more Options or Rights
previously granted to such Participant.
7. Exercise of Options or Rights.
(a) Except as provided herein, an Option or Right granted
under the Plan shall be exercisable during the lifetime of the Participant to
whom such Option or Right was granted only by such Participant and, except as
provided in paragraphs (c) and (d) of this Section 7, no such Option or Right
may be exercised unless at the time such Participant exercises such Option or
Right, such Participant has maintained Continuous Service since the date of
grant of such Option or Right.
(b) To exercise an Option or Right under the Plan, the
Participant to whom such Option or Right was granted shall give written notice
to the Corporation in form satisfactory to the Committee (and, if partial
exercises have been permitted by the Committee, by specifying the number of
Shares with respect to which such Participant elects to exercise such Option or
Right) together with full payment of the Exercise Price, if any and to the
extent required. The date of exercise shall be the date on which such notice is
received by the Corporation. Payment, if any is required, shall be made either
(i) in cash (including check, bank draft or money order) or (ii) if permitted by
the Committee, by delivering (A) Shares already owned by the Participant and
having a fair market value equal to the applicable exercise price, such fair
market value to be determined in such appropriate manner as may be provided by
the Committee or as may be required in order to comply with or to conform to
requirements of any applicable laws or regulations, or (B) a combination of cash
and such Shares.
(c) If a Participant to whom an Option or Right was granted
shall cease to maintain Continuous Service for any reason, other than
termination for cause, such Participant may, but only within the period of three
years immediately succeeding such cessation of Continuous Service and in no
event after the expiration date of such Option or Right, exercise such Option or
A-4
<PAGE>
Right to the extent that such Participant was entitled to exercise such Option
or Right at the date of such cessation, provided, however, that such right of
exercise after cessation of Continuous Service shall not be available to a
Participant if the Committee otherwise determines and so provides in the
applicable instrument or instruments evidencing the grant of such Option or
Right. If a Participant to whom an Option or Right was granted shall cease to
maintain Continuous Service by reason of death, disability or retirement then,
unless the Committee shall have otherwise provided in the instrument evidencing
the grant of an Option or Stock Appreciation Right, all Options and Rights
granted and not fully exercisable shall become exercisable in full upon the
happening of such event and shall remain so exercisable (i) in the event of
death for the period described in paragraph (d) of this Section 7 and (ii) in
the event of disability or retirement for a period of three years following such
date. If the Continuous Service of a Participant to whom an Option or Right was
granted by the Corporation is terminated for cause, all rights under any Option
or Right of such Participant shall expire immediately upon the giving to the
Participant of notice of such termination.
(d) In the event of the death of a Participant while in the
Continuous Service of the Corporation or an Affiliate or within the three year
period referred to in paragraph (c) of this Section 7, the person to whom any
Option or Right held by the Participant at the time of his death is transferred
by will or the laws of descent and distribution, or in the case of an Award
other than an Incentive Stock Option, pursuant to a qualified domestic relations
order, as defined in the Code or Title 1 of ERISA or the rules thereunder may,
but only to the extent such Participant was entitled to exercise such Option or
Right as set forth in paragraph (c) of this Section 7, exercise such Option or
Right at any time within a period of one year succeeding the date of death of
such Participant, but in no event later than ten years from the date of grant of
such Option or Right. Following the death of any Participant to whom an Option
was granted under the Plan, irrespective of whether any Related Right shall have
theretofore been granted to the Participant or whether the person entitled to
exercise such Related Right desires to do so, the Committee may, as an
alternative means of settlement of such Option, elect to pay to the person to
whom such Option is transferred by will or by the laws of descent and
distribution, or in the case of an Option other than an Incentive Stock Option,
pursuant to a qualified domestic relations order, as defined in the Code or
Title I of ERISA or the rules thereunder, the amount by which the Market Value
per Share on the date of exercise of such Option shall exceed the Exercise Price
of such Option, multiplied by the number of Shares with respect to which such
Option is properly exercised. Any such settlement of an Option shall be
considered an exercise of such Option for all purposes of the Plan.
8. Incentive Stock Options. Incentive Stock Options may be granted only
to Participants who are Employees. Any provision of the Plan to the contrary
notwithstanding, (i) no Incentive Stock Option shall be granted more than ten
years from the date the Plan is adopted by the Board of Directors of the
Corporation and no Incentive Stock Option shall be exercisable more than ten
years from the date such Incentive Stock Option is granted, (ii) the Exercise
Price of any Incentive Stock Option shall not be less than the Market Value per
Share on the date of grant of such Option, and (iii) any Incentive Stock Option
shall not be transferable by the Participant to whom such Incentive Stock Option
is granted other than by will or the laws of descent and distribution, and shall
be exercisable during such Participant's lifetime only by such Participant.
A-5
<PAGE>
9. Stock Appreciation Rights. A Stock Appreciation Right shall, upon
its exercise, entitle the Participant to whom such Stock Appreciation Right was
granted to receive a number of Shares or cash or combination thereof, as the
Committee in its discretion shall determine, the aggregate value of which (i.e.,
the sum of the amount of cash and/or Market Value of such Shares on date of
exercise) shall equal (as nearly as possible, it being understood that the
Corporation shall not issue any fractional shares) the amount by which the
Market Value per Share on the date of such exercise shall exceed the Exercise
Price of such Stock Appreciation Right, multiplied by the number of Shares with
respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be Related to an Option or may be granted
independently of any Option as the Committee shall from time to time in each
case determine. At the time of grant of an Option the Committee shall determine
whether and to what extent a Related Stock Appreciation Right shall be granted
with respect thereto; provided, however, and notwithstanding any other provision
of the Plan, that if the Related Option is an Incentive Stock Option, the
Related Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Stock Appreciation Right were
an Incentive Stock Option and as if other rights which are Related to Incentive
Stock Options were Incentive Stock Options. In the case of a Related Option,
such Related Option shall cease to be exercisable to the extent of the Shares
with respect to which the Related Stock Appreciation Right was exercised. Upon
the exercise or termination of a Related Option, any Related Stock Appreciation
Right shall terminate to the extent of the Shares with respect to which the
Related Option was exercised or terminated.
10. Limited Stock Appreciation Rights. At the time of grant of an
Option or Stock Appreciation Right to any Participant, the Committee shall have
full and complete authority and discretion to also grant to such Participant a
Limited Stock Appreciation Right which is Related to such Option or Stock
Appreciation Right; provided, however and notwithstanding any other provision of
the Plan, that if the Related Option is an Incentive Stock Option, the Related
Limited Stock Appreciation Right shall satisfy all the restrictions and
limitations of Section 8 hereof as if such Related Limited Stock Appreciation
Right were an Incentive Stock Option and as if all other Rights which are
Related to Incentive Stock Options were Incentive Stock Options. Notwithstanding
any other provision of the Plan, a Limited Stock Appreciation Right shall be
exercisable only during the period beginning on the first day following the date
of expiration of any "offer" (as such term is hereinafter defined) and ending on
the forty-fifth day following such date.
A Limited Stock Appreciation Right shall, upon its exercise,
entitle the Participant to whom such Limited Stock Appreciation Right was
granted to receive an amount of cash equal to the amount by which the "Offer
Price per Share" (as such term is hereinafter defined) or the Market Value on
the date of such exercise, as shall have been provided by the Committee in its
discretion at the time of grant, shall exceed the Exercise Price of such Limited
Stock Appreciation Right, multiplied by the number of Shares with respect to
which such Limited Stock Appreciation Right shall have been exercised. Upon the
exercise of a Limited Stock Appreciation Right, any Related Option and/or
Related Stock Appreciation Right shall cease to be exercisable to the extent of
the Shares with respect to which such Limited Stock Appreciation Right was
exercised. Upon the exercise or termination of a Related Option or Related Stock
A-6
<PAGE>
Appreciation Right, any Related Limited Stock Appreciation Right shall terminate
to the extent of the Shares with respect to which such Related Option or Related
Stock Appreciation Right was exercised or terminated.
For the purposes of this Section 10, the term "Offer" shall mean any
tender offer or exchange offer for Shares other than one made by the
Corporation, provided that the corporation, person or other entity making the
offer acquires pursuant to such offer either (i) 25% of the Shares outstanding
immediately prior to the commencement of such offer or (ii) a number of Shares
which, together with all other Shares acquired in any tender offer or exchange
offer (other than one made by the Corporation) which expired within sixty days
of the expiration date of the offer in question, equals 25% of the Shares
outstanding immediately prior to the commencement of the offer in question. The
term "Offer Price per Share" as used in this Section 10 shall mean the highest
price per Share paid in any Offer which Offer is in effect any time during the
period beginning on the sixtieth day prior to the date on which a Limited Stock
Appreciation Right is exercised and ending on the date on which such Limited
Stock Appreciation Right is exercised. Any securities or property which are part
or all of the consideration paid for Shares in the Offer shall be valued in
determining the Offer Price per Share at the higher of (A) the valuation placed
on such securities or property by the corporation, person or other entity making
such Offer or (B) the valuation placed on such securities or property by the
Committee.
11. Terms and Conditions of Restricted Stock. The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (f) of this Section 11, to provide such
other terms and conditions (which need not be identical among Participants) in
respect of such Awards, and the vesting thereof, as the Committee shall
determine and provide in the agreement referred to in paragraph (d) of this
Section 11.
(a) At the time of an award of Restricted Stock, the Committee
shall determine and provide in the agreement referred to in paragraph (d) of
this Section 11, the Shares awarded as Restricted Stock shall vest. Subject to
any such other terms and conditions as the Committee shall provide, shares of
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, except as hereinafter provided, during the
Restricted Period. Except for such restrictions, and subject to paragraphs (c),
(d) and (e) of this Section 11 and Section 12 hereof, the Participant as owner
of such shares shall have all the rights of a stockholder, including but not
limited to the right to receive all dividends paid on such shares and the right
to vote such shares. The Committee shall have the authority, in its discretion,
to accelerate the time at which any or all of the restrictions shall lapse with
respect to any shares of Restricted Stock prior to the expiration of the
Restricted Period with respect thereto, or to remove any or all of such
restrictions, whenever it may determine that such action is appropriate by
reason of changes in applicable tax or other laws or other changes in
circumstances occurring after the commencement of such Restricted Period.
(b) Except as provided in Section 14 hereof, if a Participant
ceases to maintain Continuous Service for any reason (other than death, total or
partial disability or normal or early retirement) unless the Committee shall
otherwise determine, all shares of Restricted Stock theretofore awarded to such
Participant and which at the time of such termination of Continuous Service are
subject to the restrictions imposed by paragraph (a) of this Section 11 shall
upon such termination of Continuous Service be forfeited and returned to the
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<PAGE>
Corporation. Unless the Committee shall have provided in the agreement referred
to in paragraph (d) of this Section 11 for a ratable lapse of restrictions with
respect to an award of shares of Restricted Stock during the Restricted Period,
if a Participant ceases to maintain Continuous Service by reason of death,
disability or retirement, such portion of such shares of Restricted Stock
awarded to such Participant which at the time of such termination of Continuous
Service are subject to the restrictions imposed by paragraph (a) of this
Section 11 as shall be equal to the portion of the Restricted Period with
respect to such shares which shall have elapsed at the time of such termination
of Continuous Service shall be free of restrictions and shall not be forfeited.
(c) Each certificate in respect of shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) contained in the 1997 Stock Option and Incentive
Plan of HBancorporation, Inc. and an Agreement entered into between the
registered owner and HBancorporation, Inc. Copies of such Plan and
Agreement are on file in the offices of the Secretary of
HBancorporation, Inc., 619 12th Street, Lawrenceville, Illinois 62439.
(d) At the time of an award of shares of Restricted Stock, the
Participant shall enter into an Agreement with the Corporation in a form
specified by the Committee, agreeing to the terms and conditions of the award
and such other matters as the Committee shall in its sole discretion determine.
(e) At the time of an award of shares of Restricted Stock, the
Committee may, in its discretion, determine that the payment to the Participant
of dividends declared or paid on such shares, or specified portion thereof, by
the Corporation shall be deferred until the earlier to occur of (i) the lapsing
of the restrictions imposed under paragraph (a) of this Section 11 or (ii) the
forfeiture of such shares under paragraph (b) of this Section 11, and shall be
held by the Corporation for the account of the Participant until such time. In
the event of such deferral, there shall be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends, together with interest accrued thereon as
aforesaid, shall be made upon the earlier to occur of the events specified in
(i) and (ii) of the immediately preceding sentence.
(f) At the expiration or lapse of the restrictions imposed by
paragraph (a) of this Section 11, the Corporation shall redeliver to the
Participant (or where the relevant provision of paragraph (b) of this Section 11
applies in the case of a deceased Participant, to his legal representative,
beneficiary or heir) the certificate(s) and stock power deposited with it
pursuant to paragraph (c) of this Section 11 and the Shares represented by such
certificate(s) shall be free of the restrictions referred to in paragraph (a) of
this Section 11.
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<PAGE>
12. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number,
class and exercise price of shares as to which Awards may be granted under the
Plan and the number and class of shares with respect to which Awards theretofore
have been granted under the Plan shall be appropriately adjusted by the
Committee, whose determination shall be conclusive. Any shares of stock or other
securities received, as a result of any of the foregoing, by a Participant with
respect to Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Corporation in the manner
provided in Section 11 hereof.
13. Effect of Merger. In the event of any merger, consolidation or
combination of the Corporation (other than a merger, consolidation or
combination in which the Corporation is the continuing entity and which does not
result in the outstanding Shares being converted into or exchanged for different
securities, cash or other property, or any combination thereof) pursuant to a
plan or agreement the terms of which are binding upon all stockholders of the
Corporation (except to the extent that dissenting stockholders may be entitled,
under statutory provisions or provisions contained in the certificate of
incorporation, to receive the appraised or fair value of their holdings), any
Participant to whom an Option or Right has been granted at least 6 months prior
to such event shall have the right (subject to the provisions of the Plan and
any limitation applicable to such Option or Right), thereafter and during the
term of each such Option or Right, to receive upon exercise of any such Option
or Right an amount equal to the excess of the fair market value on the date of
such exercise of the securities, cash or other property, or combination thereof,
receivable upon such merger, consolidation or combination in respect of a Share
over the Exercise Price of such Right or Option, multiplied by the number of
Shares with respect to which such Option or Right shall have been exercised.
Such amount may be payable fully in cash, fully in one or more of the kind or
kinds of property payable in such merger, consolidation or combination, or
partly in cash and partly in one or more of such kind or kinds of property, all
in the discretion of the Committee. Unless the Committee shall have provided
otherwise in the agreement referred to in paragraph (d) of Section 11 hereof, in
the event of any such merger, consolidation or combination any Restricted Period
shall lapse with respect to Shares of Restricted Stock awarded at least six
months prior to such event, all such Shares shall be fully vested in the
Participants to whom such Shares were awarded, and the holders of such Shares
shall be eligible to receive in respect thereof the full amount receivable per
Share in such merger, consolidation or combination.
14. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 14 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Corporation with respect to which 25% or more of the
total number of votes for the election of the Board of Directors of the
Corporation may be cast, (ii) as a result of, or in connection with, any cash
tender offer, exchange offer, merger or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of the Corporation shall cease to constitute a majority of the
Board of Directors of the Corporation or (iii) the shareholders of the
Corporation shall approve an agreement providing either for a transaction in
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<PAGE>
which the Corporation will cease to be an independent publicly owned entity or
for a sale or other disposition of all or substantially all the assets of the
Corporation. If the Continuous Service of any Participant of the Corporation or
any Affiliate is involuntarily terminated for whatever reason, at any time
within eighteen months after a change in control, unless the Committee shall
have otherwise provided in the agreement referred to in paragraph (d) of Section
11 hereof, any Restricted Period with respect to Restricted Stock theretofore
awarded to such Participant shall lapse upon such termination and all Shares
awarded as Restricted Stock shall become fully vested in the Participant to whom
such Shares were awarded. If a tender offer or exchange offer for Shares (other
than such an offer by the Corporation) is commenced, or if the event specified
in clause (iii) above shall occur, unless the Committee shall have otherwise
provided in the instrument evidencing the grant of an Option or Stock
Appreciation Right, all Options and Stock Appreciation Rights theretofore
granted and not fully exercisable shall become exercisable in full upon the
happening of such event and shall remain so exercisable for a period of sixty
days following such date, after which they shall revert to being exercisable in
accordance with their terms; provided, however, that no Option or Stock
Appreciation Right shall be exercisable by a director, Senior Officer or Ten
Percent Beneficial Owner of the Corporation within six months of the date of
grant of such Option or Stock Appreciation Right and no Option or Stock
Appreciation Right which has previously been exercised or otherwise terminated
shall become exercisable.
15. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or in the case of
Awards other than Incentive Stock Options pursuant to a qualified domestic
relations order, as defined in the Code or Title I of ERISA or the rules
thereunder.
16. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the Corporation
or any Affiliate.
17. Delivery and Registration of Stock. The Corporation's obligation to
deliver Shares with respect to an Award shall, if the Committee so requests, be
conditioned upon the receipt of a representation as to the investment intention
of the Participant to whom such Shares are to be delivered, in such form as the
Committee shall determine to be necessary or advisable to comply with the
provisions of the Securities Act of 1933 or any other Federal, state or local
securities legislation or regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the Shares or other
action eliminating the necessity of such representation under such Securities
Act or other securities legislation. The Corporation shall not be required to
deliver any Shares under the Plan prior to (i) the admission of such shares to
listing on any stock exchange on which Shares may then be listed, and (ii) the
completion of such registration or other qualification of such Shares under any
state or Federal law, rule or regulation, as the Committee shall determine to be
necessary or advisable.
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<PAGE>
18. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such shares in taxable
income), the Corporation may, in its sole discretion, retain a sufficient number
of shares held by it to cover the amount required to be withheld. The
Corporation may, in its sole discretion, have the right to deduct from all
dividends paid with respect to shares of Restricted Stock the amount of any
taxes which the Corporation is required to withhold with respect to such
dividend payments.
The Corporation may, in its sole discretion, have the right to deduct
from all amounts paid in cash with respect to the exercise of a Right under the
Plan any taxes required by law to be withheld with respect to such cash
payments. Where a Participant or other person is entitled to receive Shares
pursuant to the exercise of an Option or Right pursuant to the Plan, the
Corporation may, in its sole discretion, shall have the right to require the
Participant or such other person to pay the Corporation the amount of any taxes
which the Corporation is required to withhold with respect to such Shares.
19. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time, but
(except as provided in Section 12 hereof) no amendment shall be made without
approval of the stockholders of the Corporation which shall (i) materially
increase the aggregate number of Shares with respect to which Awards may be made
under the Plan, (ii) materially increase the aggregate number of Shares which
may be subject to Awards to Participants who are not Employees or (iii) change
the class of persons eligible to participate in the Plan; provided, however,
that no such amendment, suspension or termination shall impair the rights of any
Participant, without his consent, in any Award theretofore made pursuant to the
Plan.
20. Effective Date and Term of Plan. The Plan shall become effective
upon its ratification by the Corporation's stockholders. It shall continue in
effect for a term of ten years unless sooner terminated under Section 19 hereof.
21. Initial Grant. By, and simultaneously with, the adoption of this
Plan, each member of the Board of Directors of the Corporation at the time of
the stockholders ratification of the Plan who is not an Employee, is hereby
granted a ten year, Non-Qualified Stock Option to purchase 2,500 shares of the
Corporation's common stock at an exercise price per share equal to the Market
Value of the Corporation's common stock on the date of grant of the Option. Each
such Option shall be evidenced by a Non-Qualified Stock Option Agreement in a
form approved by the Board of Directors and shall be subject in all respects to
the terms and conditions of this Plan, which are controlling. All options
granted pursuant to this Section 21 shall be rounded down to the nearest whole
share to the extent necessary to ensure that no options to purchase stock
representing fractional shares are granted.
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<PAGE>
HBANCORPORATION, INC.
RECOGNITION AND RETENTION PLAN
1. Plan Purpose. The purpose of the Plan is to promote the long-term
interests of the Corporation and its stockholders by providing a means for
attracting and retaining executive officers of the Corporation and its
Affiliates.
2. Definitions. The following definitions are applicable to the Plan:
"Award" - means the grant by the Committee of Restricted
Stock, as provided in the Plan.
"Affiliate" - means any "parent corporation" or "subsidiary
corporation" of the Corporation, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
"Bank" - means Heritage National Bank.
"Code" - means the Internal Revenue Code of 1986, as amended.
"Committee" - means the Committee referred to in Section 7
hereof.
"Continuous Service" - means the absence of any interruption
or termination of service as a director, advisory director, officer or employee
of the Corporation or any Affiliate. Service shall not be considered interrupted
in the case of sick leave, military leave or any other leave of absence approved
by the Corporation or any Affiliate or in the case of transfers between payroll
locations of the Corporation or between the Corporation, its subsidiaries or its
successor.
"Corporation" - means HBancorporation, Inc., a Delaware
corporation.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as amended.
"Non-Employee Director" - means a director who a) is not
currently an officer or employee of the Corporation; b) is not a former employee
of the Corporation who receives compensation for prior services (other than from
a tax-qualified retirement plan); c) has not been an officer of the Corporation;
d) does not receive remuneration from the Corporation in any capacity other than
as a director; and e) does not possess an interest in any other transactions or
is not engaged in a business relationship for which disclosure would be required
under Item 404(a) or (b) of Regulation S-K.
"Participant" - means any director, advisory director, officer
or employee of the Corporation or any Affiliate who is selected by the Committee
to receive an Award and any director or advisory director of the Corporation who
is granted an Award pursuant to Section 13 hereof.
"Plan" - means the Recognition and Retention Plan of the
Corporation.
<PAGE>
"Restricted Period" - means the period of time selected by the
Committee for the purpose of determining when restrictions are in effect under
Section 3 hereof with respect to Restricted Stock awarded under the Plan.
"Restricted Stock" - means Shares which have been contingently
awarded to a Participant by the Committee subject to the restrictions referred
to in Section 3 hereof, so long as such restrictions are in effect.
"Shares" - means the common stock, par value $0.01 per share,
of the Corporation.
3. Terms and Conditions of Restricted Stock. The Committee shall have
full and complete authority, subject to the limitations of the Plan, to grant
awards of Restricted Stock and, in addition to the terms and conditions
contained in paragraphs (a) through (f) of this Section 3, to provide such other
terms and conditions (which need not be identical among Participants) in respect
of such Awards, and the vesting thereof, as the Committee shall determine.
(a) At the time of an award of Restricted Stock, the Committee
shall establish for each Participant a Restricted Period, during which or at the
expiration of which, as the Committee shall determine and provide in the
agreement referred to in paragraph (d) of this Section 3, the Shares awarded as
Restricted Stock shall vest, and subject to any such other terms and conditions
as the Committee shall provide, shares of Restricted Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered by the Participant,
except as hereinafter provided, during the Restricted Period. Except for such
restrictions, and subject to paragraphs (d) and (e) of this Section 3 and
Section 4 hereof, the Participant as owner of such shares shall have all the
rights of a stockholder, including but not limited to the right to receive all
dividends paid on such shares and the right to vote such shares. The Committee
shall have the authority, in its discretion, to accelerate the time at which any
or all of the restrictions shall lapse with respect thereto, or to remove any or
all of such restrictions, whenever it may determine that such action is
appropriate by reason of changes in applicable tax or other laws or other
changes in circumstances occurring after the commencement of such Restricted
Period.
(b) Except as provided in Section 5 hereof, if a Participant
ceases to maintain Continuous Service for any reason (other than death,
disability or retirement), unless the Committee shall otherwise determine, all
Shares of Restricted Stock theretofore awarded to such Participant and which at
the time of such termination of Continuous Service are subject to the
restrictions imposed by paragraph (a) of this Section 3 shall upon such
termination of Continuous Service be forfeited and returned to the Corporation.
If a Participant ceases to maintain Continuous Service by reason of death,
disability or retirement, the Restricted Stock then still subject to
restrictions imposed by paragraph (a) of this Section 3 will be free of those
restrictions as of the day prior to such death, disability or retirement.
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<PAGE>
(c) Each certificate in respect of Shares of Restricted Stock
awarded under the Plan shall be registered in the name of the Participant and
deposited by the Participant, together with a stock power endorsed in blank,
with the Corporation and shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and conditions
(including forfeiture) contained in the Recognition and Retention Plan
of HBancorporation, Inc. Copies of such Plan are on file in the offices
of the Secretary of HBancorporation, Inc., 619 12th Street,
Lawrenceville, Illinois 62439.
(d) At the time of any Award, the Participant shall enter into
an agreement with the Corporation in a form specified by the Committee, agreeing
to the terms and conditions of the Award and such other matters as the
Committee, in its sole discretion, shall determine (the "Restricted Stock
Agreement").
(e) At the time of an award of shares of Restricted Stock, the
Committee may, in its discretion, determine that the payment to the Participant
of dividends declared or paid on such shares, or specified portions thereof, by
the Corporation shall be deferred until the earlier to occur of (i) the lapsing
of the restrictions imposed under paragraph (a) of this Section 3 or (ii) the
forfeiture of such shares under paragraph (b) of this Section 3, and shall be
held by the Corporation for the account of the Participant until such time. In
the event of such deferral, there shall be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends, together with interest accrued thereon, shall be
made upon the earlier to occur of the events specified in (i) and (ii) of the
immediately preceding sentence.
(f) At the expiration of the restrictions imposed by paragraph
(a) of this Section 3, the Corporation shall redeliver to the Participant (or
where the relevant provision of paragraph (b) of this Section 3 applies in the
case of a deceased Participant, to his legal representative, beneficiary or
heir) the certificate(s) and stock power deposited with it pursuant to paragraph
(c) of this Section 3 and the Shares represented by such certificate(s) shall be
free of the restrictions referred to in paragraph (a) of this Section 3.
4. Adjustments Upon Changes in Capitalization. In the event of any
change in the outstanding Shares subsequent to the effective date of the Plan by
reason of any reorganization, recapitalization, stock split, stock dividend,
combination or exchange of shares, merger, consolidation or any change in the
corporate structure or Shares of the Corporation, the maximum aggregate number
and class of shares as to which Awards may be granted under the Plan and the
number and class of shares with respect to which Awards theretofore have been
granted under the Plan shall be appropriately adjusted by the Committee, whose
determination shall be conclusive. Any shares of stock or other securities
received, as a result of any of the foregoing, by a Participant with respect to
Restricted Stock shall be subject to the same restrictions and the
certificate(s) or other instruments representing or evidencing such shares or
securities shall be legended and deposited with the Corporation in the manner
provided in Section 3 hereof.
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5. Effect of Change in Control. Each of the events specified in the
following clauses (i) through (iii) of this Section 5 shall be deemed a "change
of control": (i) any third person, including a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, shall become the beneficial
owner of shares of the Corporation or the Bank with respect to which 25% or more
of the total number of votes which may be cast for the election of the Board of
Directors of the Corporation, (ii) as a result of, or in connection with, any
cash tender offer, merger or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who were
directors of the Corporation or the Bank shall cease to constitute a majority of
the Board of Directors of the Corporation, or (iii) the shareholders of the
Corporation shall approve an agreement providing for a sale or other disposition
of all or substantially all the assets of the Corporation or the Bank. If the
Continuous Service of any Participant of the Corporation is involuntarily
terminated for whatever reason, at any time within twelve months after a change
in control, unless the Committee shall have otherwise provided, any Restricted
Period with respect to Restricted Stock theretofore awarded to such Participant
shall lapse upon such termination and all Shares awarded as Restricted Stock
shall become fully vested in the Participant to whom such Shares were awarded.
6. Assignments and Transfers. No Award nor any right or interest of a
Participant under the Plan in any instrument evidencing any Award under the Plan
may be assigned, encumbered or transferred except, in the event of the death of
a Participant, by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the Code or Title I of ERISA or
the rules thereunder.
7. Administration. The Plan shall be administered by a Committee
consisting of two or more members, each of whom shall be a Non-Employee
Director. The members of the Committee shall be appointed by the Board of
Directors of the Corporation. Except as limited by the express provisions of the
Plan, the Committee shall have sole and complete authority and discretion to (i)
select Participants and grant Awards; (ii) determine the number of shares to be
subject to types of Awards generally, as well as to individual Awards granted
under the Plan; (iii) determine the terms and conditions upon which Awards shall
be granted under the Plan; (iv) prescribe the form and terms of instruments
evidencing such grants; and (v) establish from time to time regulations for the
administration of the Plan, interpret the Plan, and make all determinations
deemed necessary or advisable for the administration of the Plan.
A majority of the Committee shall constitute a quorum, and the acts of
a majority of the members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee without a meeting,
shall be acts of the Committee.
8. Shares Subject to Plan. Subject to adjustment by the operation of
Section 4 hereof, the maximum number of Shares with respect to which Awards may
be made under the Plan is 5% of the total Shares of the Corporation outstanding
on the date of the ratification of the Plan by the Corporation's stockholders.
The shares with respect to which Awards may be made under the Plan may be either
authorized and unissued shares or issued shares heretofore or hereafter
reacquired and held as treasury shares. An Award shall not be considered to have
been made under the Plan with respect to Restricted Stock which is forfeited and
new Awards may be granted under the Plan with respect to the number of Shares as
to which such forfeiture has occurred.
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<PAGE>
9. Employee Rights Under the Plan. No director, officer or employee
shall have a right to be selected as a Participant nor, having been so selected,
to be selected again as a Participant and no director, officer, employee or
other person shall have any claim or right to be granted an Award under the Plan
or under any other incentive or similar plan of the Corporation or any
Affiliate. Neither the Plan nor any action taken thereunder shall be construed
as giving any employee any right to be retained in the employ of the
Corporation, the Bank or any Affiliate.
10. Withholding Tax. Upon the termination of the Restricted Period with
respect to any shares of Restricted Stock (or at any such earlier time, if any,
that an election is made by the Participant under Section 83(b) of the Code, or
any successor provision thereto, to include the value of such shares in taxable
income), the Corporation may withhold from any payment or distribution made
under this Plan sufficient Shares or may withhold or cause to be paid by the
Participant sufficient cash to cover any applicable withholding and employment
taxes. The Corporation shall have the right to deduct from all dividends paid
with respect to shares of Restricted Stock the amount of any taxes which the
Corporation is required to withhold with respect to such dividend payments. No
discretion or choice shall be conferred upon any Participant with respect to the
form, timing or method of any such tax withholding.
11. Amendment or Termination. The Board of Directors of the Corporation
may amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that no such amendment, suspension or termination shall
impair the rights of any Participant, without his consent, in any Award
theretofore made pursuant to the Plan.
12. Term of Plan. The Plan shall become effective upon its ratification
by the stockholders of the Corporation. It shall continue in effect for a term
of ten years unless sooner terminated under Section 11 hereof.
13. Initial Grants. By, and simultaneously with, the ratification of
the Plan by the Corporation's stockholders, each member of the Board of
Directors who is not a full-time Employee, is hereby granted an Award equal to
1,200 shares of the Corporation's common stock. Each such Award shall be
evidenced by a Restricted Stock Agreement in a form approved by the Committee
administering this Plan and shall be subject in all respects to the terms and
conditions of this Plan, which are controlling. All Awards of Restricted Stock
granted pursuant to this Section 13 shall be rounded down to the nearest whole
share to the extent necessary to ensure that no shares of Restricted Stock
representing fractional shares are issued. The Awards will vest in five equal
installments, with the first installment vesting immediately upon the
ratification of the Plan by the Corporation's stockholders and each additional
installment vesting after the end of the subsequent calendar years, as long as
the Director maintains Continuous Service with the Bank after the Conversion.
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<PAGE>
REVOCABLE PROXY REVOCABLE PROXY
HBancorporation, Inc.
SPECIAL MEETING OF STOCKHOLDERS
April 28, 1997
The undersigned hereby appoints the Board of Directors of HBancorporation,
Inc. (the "Company"), with full powers of substitution, to act as attorneys and
proxies for the undersigned to vote all shares of capital stock of the Company
which the undersigned is entitled to vote at the Special Meeting of Stockholders
(the "Meeting") to be held at the Elks Lodge located at 519 12th Street,
Lawrenceville, Illinois, on April 28, 1997 at 10:00 a.m. and at any and all
adjournments and postponements thereof.
I. The ratification of the adoption of the Company's 1997 Stock Option and
Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
II. The ratification of the adoption of the Company's Recognition and Retention
Plan.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Meeting or any adjournment or
postponement thereof.
- --------------------------------------------------------------------------------
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 THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
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The Board of Directors recommends a vote "FOR" each of the
proposals listed above.
(Continued and to be SIGNED on Reverse Side)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Should the undersigned be present and choose to vote at the Meeting or at
any adjournments or postponements 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 such attorneys or proxies shall be
deemed terminated and of no further force and effect. This proxy may also be
revoked by filing a written notice of revocation with the Secretary of the
Company or by duly executing a proxy bearing a later date.
The undersigned acknowledges receipt from the Company, prior to the
execution of this proxy, of notice of the Meeting and a proxy statement.
Dated: , 1997 ----------------------------------------
--------------- Signature of Stockholder
----------------------------------------
Signature of Stockholder
Please sign exactly as your name(s)
Appear(s) to the left. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title. If shares are held jointly,
each holder should sign.
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PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE
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