<PAGE> 1
SCHEDULE 14-A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ ]
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 Section 240.14a-11(c) or Section 240.14a-12
HF Bancorp, Inc.
--------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Lori M. Beresford, Muldoon, Murphy & Faucette
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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:
.......................................................................
2) Aggregate number of securities to which transaction applies:
.......................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
.......................................................................
4) Proposed maximum aggregate value of transaction:
.......................................................................
5) Total fee paid:
.......................................................................
<PAGE> 2
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
............................................
2) Form, Schedule or Registration Statement No.:
............................................
3) Filing Party:
............................................
4) Date Filed:
............................................
<PAGE> 3
HF BANCORP, INC.
445 EAST FLORIDA AVENUE
HEMET, CALIFORNIA 92543-4244
(800) 540-4363 EXT. 2103
September 25, 1997
Fellow Stockholders:
You are cordially invited to attend the annual meeting of stockholders
(the "Annual Meeting") of HF Bancorp, Inc. (the "Company"), the holding company
for Hemet Federal Savings and Loan Association (the "Bank"), Hemet, California,
which will be held on October 28, 1997, at 2:00 p.m., Pacific Time, at the
Simpson Neighborhood Center, 305 E. Devonshire Avenue, Hemet, California.
The attached Notice of the Annual Meeting and the Proxy Statement describe
the formal business to be transacted at the Annual Meeting. Directors and
officers of HF Bancorp, Inc., as well as a representative of Deloitte & Touche
LLP, the Company's independent auditors, will be present at the Annual Meeting
to respond to any questions that stockholders may have regarding the business to
be transacted.
The Board of Directors of HF Bancorp, Inc. has determined that the matters
to be considered at the Annual Meeting are in the best interests of the Company
and its stockholders. For the reasons set forth in the Proxy Statement, the
Board unanimously recommends that you vote "FOR" each matter to be considered.
YOUR COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE COMMON STOCK MUST
BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE A QUORUM FOR THE
CONDUCT OF BUSINESS. WHETHER OR NOT YOU EXPECT TO ATTEND, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED SO
THAT YOUR SHARES WILL BE REPRESENTED.
On behalf of the Board of Directors and all of the employees of the
Company and the Bank, I thank you for your continued interest and support.
Sincerely yours,
/s/ J. Robert Eichinger
J. Robert Eichinger
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE> 4
HF BANCORP, INC.
445 EAST FLORIDA AVENUE
HEMET, CALIFORNIA 92543
(800) 540-4363 EXT. 2411
----------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on October 28, 1997
----------------------------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders (the
"Annual Meeting") of HF Bancorp, Inc. (the "Company") will be held on October
28, 1997, at 2:00 p.m., Pacific Time, at the Simpson Neighborhood Center, 305 E.
Devonshire Avenue, Hemet, California.
The purpose of the Annual Meeting is to consider and vote upon the
following matters:
1. The election of three directors to three-year terms of office each
or until their successors are elected and qualified;
2. The ratification of the Amended and Restated HF Bancorp, Inc.
Stock-Based Incentive Plan ("Plan") and the approval of an amendment
to the Plan to increase the aggregate number of shares of common
stock authorized for issuance under such plan by 150,000;
3. The ratification of the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending June
30, 1998; and
4. Such other matters as may properly come before the Annual Meeting
and at any adjournments thereof, including whether or not to adjourn
the meeting.
The Board of Directors has established September 5, 1997, as the record
date for the determination of stockholders entitled to receive notice of and to
vote at the Annual Meeting and at any adjournments thereof. Only record holders
of the common stock of the Company as of the close of business on that date will
be entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. In the event there are not sufficient votes for a quorum or to approve
or ratify any of the foregoing proposals at the time of the Annual Meeting, the
Annual Meeting may be adjourned in order to permit further solicitation of
proxies by the Company. A list of stockholders entitled to vote at the Annual
Meeting will be available at HF Bancorp, Inc., 445 East Florida Avenue, Hemet,
California 92543-4244, for a period of ten days prior to the Annual Meeting and
will also be available at the meeting itself.
By Order of the Board of Directors
/s/ Janet E. Riley
Janet E. Riley
CORPORATE SECRETARY
Hemet, California
September 25, 1997
<PAGE> 5
HF BANCORP, INC.
-----------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 28, 1997
-----------------------
SOLICITATION AND VOTING OF PROXIES
This Proxy Statement is being furnished to stockholders of HF Bancorp,
Inc. (the "Company") in connection with the solicitation by the Board of
Directors ("Board of Directors" or "Board") of proxies to be used at the annual
meeting of stockholders (the "Annual Meeting"), to be held on October 28, 1997,
at 2:00 p.m., Pacific Time, at the Simpson Neighborhood Center, 305 E.
Devonshire Avenue, Hemet, California and at any adjournments thereof. The 1997
Annual Report on Form 10-K to Stockholders, including consolidated financial
statements for the fiscal year ended June 30, 1997, and a proxy card,
accompanies this Proxy Statement, which is first being mailed to record holders
on or about September 25, 1997.
Regardless of the number of shares of common stock owned, it is important
that record holders of a majority of the outstanding shares of common stock be
represented by proxy or in person at the Annual Meeting. Stockholders are
requested to vote by completing the enclosed proxy card and returning it signed
and dated in the enclosed postage-paid envelope. Stockholders are urged to
indicate their vote in the spaces provided on the proxy card. PROXIES SOLICITED
BY THE BOARD OF DIRECTORS OF THE COMPANY WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN THEREIN. WHERE NO INSTRUCTIONS ARE INDICATED, SIGNED PROXY
CARDS WILL BE VOTED FOR THE ELECTION OR RATIFICATION OF EACH OF THE NOMINEES FOR
DIRECTOR NAMED IN THIS PROXY STATEMENT, FOR THE RATIFICATION OF THE AMENDED AND
RESTATED HF BANCORP, INC. STOCK-BASED INCENTIVE PLAN (THE "INCENTIVE PLAN"), AND
APPROVAL OF AN AMENDMENT INCREASING THE AGGREGATE NUMBER OF SHARES AUTHORIZED
FOR ISSUANCE UNDER SUCH PLAN BY 150,000 SHARES AND FOR THE RATIFICATION OF
DELOITTE & TOUCHE, LLP, AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING JUNE
30, 1998.
Other than the matters set forth on the attached Notice of Annual Meeting
of Stockholders, the Board of Directors knows of no additional matters that will
be presented for consideration at the Annual Meeting. EXECUTION OF A PROXY,
HOWEVER, CONFERS ON THE DESIGNATED PROXY HOLDERS DISCRETIONARY AUTHORITY TO VOTE
THE SHARES IN ACCORDANCE WITH THEIR BEST JUDGMENT ON SUCH OTHER BUSINESS, IF
ANY, THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND AT ANY ADJOURNMENTS
THEREOF, INCLUDING WHETHER OR NOT TO ADJOURN THE ANNUAL MEETING.
A proxy may be revoked at any time prior to its exercise by filing a
written notice of revocation with the Corporate Secretary of the Company, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. However, if you are a
stockholder whose shares are not registered in your own name, you will need
appropriate documentation from your record holder to vote personally at the
Annual Meeting.
<PAGE> 6
The cost of solicitation of proxies on behalf of the Board of Directors
will be borne by the Company. Proxies may be solicited personally or by mail or
telephone by directors, officers and other employees of the Company and its
subsidiary, Hemet Federal Savings and Loan Association (the "Bank"), without
additional compensation therefor. The Company will also request persons, firms
and corporations holding shares in their names, or in the name of their
nominees, which are beneficially owned by others, to send proxy material to and
obtain proxies from such beneficial owners, and will reimburse such holders for
their reasonable expenses in doing so.
VOTING SECURITIES
The securities which may be voted at the Annual Meeting consist of shares
of common stock of the Company ("Common Stock"), with each share entitling its
owner to one vote on all matters to be voted on at the Annual Meeting, except as
described below. There is no cumulative voting for the election of directors.
The close of business on September 5, 1997, has been fixed by the Board of
Directors as the record date (the "Record Date") for the determination of
stockholders of record entitled to notice of and to vote at the Annual Meeting
and at any adjournments thereof. The total number of shares of Common Stock
outstanding on the Record Date was 6,281,875 shares.
In accordance with the provisions of the Company's Certificate of
Incorporation, record holders of Common Stock who beneficially own in excess of
10% of the outstanding shares of Common Stock (the "Limit") are not entitled to
any vote with respect to the shares held in excess of the Limit. A person or
entity is deemed to beneficially own shares owned by an affiliate of, as well as
by persons acting in concert with, such person or entity. The Company's
Certificate of Incorporation authorizes the Board of Directors (i) to make all
determinations necessary to implement and apply the Limit, including determining
whether persons or entities are acting in concert, and (ii) to demand that any
person who is reasonably believed to beneficially own stock in excess of the
Limit supply information to the Company to enable the Board of Directors to
implement and apply the Limit.
The presence, in person or by proxy, of the holders of at least a majority
of the total number of shares of Common Stock entitled to vote (after giving
effect to the Limit described above, if applicable) is necessary to constitute a
quorum at the Annual Meeting. In the event that there are not sufficient votes
for a quorum, or to approve or ratify any matter being presented at the time of
the Annual Meeting, the Annual Meeting may be adjourned in order to permit the
further solicitation of proxies.
As to the election of directors, the proxy card being provided by the
Board of Directors enables a stockholder to vote "FOR" the election of the
nominees proposed by the Board of Directors, or to "WITHHOLD AUTHORITY" to vote
for one or more of the nominees being proposed. Under Delaware law and the
Company's Bylaws, directors are elected by a plurality of votes cast, without
regard to either broker non-votes, or proxies as to which authority to vote for
one or more of the nominees being proposed is withheld.
2
<PAGE> 7
As to the proposed ratification of the Incentive Plan submitted for
shareholder action set forth in the Proposal, and approval of the increase in
the aggregate number of shares authorized for issuance under such plan, the
proxy card being provided by the Board of Directors enables a shareholder to
check the appropriate box on the proxy card to (i) vote "FOR" the Proposal, (ii)
vote "AGAINST" the Proposal, or (iii) "ABSTAIN" from voting on such item. Under
Delaware law, an affirmative vote at the Annual Meeting at which a quorum is
present of the holders of a majority of the shares of Common Stock present in
person or by proxy and entitled to vote on the Proposal is required to
constitute shareholder approval or ratification of the Proposal. Shares as to
which the "ABSTAIN" box has been selected on the proxy card with respect to the
Proposal will be counted as present and entitled to vote and have the effect of
a vote against the matter for which the "ABSTAIN" box has been selected. In
contrast, shares underlying broker non-votes are not counted as present and
entitled to vote on the Proposal and have no effect on the vote on the Proposal.
As to the approval of Deloitte & Touche LLP as independent auditors of the
Company and all other matters that may properly come before the Annual Meeting,
by checking the appropriate box, a stockholder may: (i) vote "FOR" the item;
(ii) vote "AGAINST" the item; or (iii) "ABSTAIN" from voting on the item. Under
the Company's Bylaws, unless otherwise required by law, all such matters shall
be determined by a majority of the votes cast, without regard to either broker
non-votes, or proxies marked "ABSTAIN" as to that matter.
Proxies solicited hereby will be returned to the Company's transfer agent,
and will be tabulated by inspectors of election designated by the Board of
Directors, who will not be employed by, or a director of, the Company or any of
its affiliates. After the final adjournment of the Annual Meeting, the proxies
will be returned to the Company for safekeeping.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to those persons believed by
the Company to be beneficial owners of more than 5% of the Company's outstanding
shares of Common Stock on the Record Date or as disclosed in certain reports
regarding such ownership filed by such persons with the Company and with the
Securities and Exchange Commission ("SEC"), in accordance with Sections 13(d)
and 13(g) of the Securities Exchange Act of 1934, as amended ("Exchange Act").
Other than those persons listed below, the Company is not aware of any person,
as such term is defined in the Exchange Act, that owns more than 5% of the
Company's Common Stock as of the Record Date.
3
<PAGE> 8
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
- ------------------ ---------------------------------- ----------- --------
<S> <C> <C> <C>
Common Stock Hemet Federal Savings and Loan 453,701(1) 7.1%
Association Employee Stock Ownership
Plan ("ESOP")
445 East Florida Avenue
Hemet, California 92543-4244
Common Stock Kahn Brothers & Co., Inc. 543,080(2) 8.5
555 Madison Avenue
New York, New York 10022
Common Stock Brandes Investment 347,485(3) 5.4
12750 High Bluff Drive
San Diego, California 92130
</TABLE>
- -------------------------
(1) Shares of Common Stock were acquired by the ESOP in the Conversion. The
ESOP Committee administers the ESOP. The ESOP Trustee must vote all
allocated shares held in the ESOP in accordance with the instructions of
the participants. As of the Record Date, 94,895 shares have been allocated
to participant's accounts and remain in the ESOP Trust. Under the ESOP,
unallocated shares will be voted by the ESOP Trustee in a manner calculated
to most accurately reflect the instructions received from participants
regarding the allocated stock so long as such vote is in accordance with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(2) Based upon a Schedule 13G filed on behalf of Kahn Brothers & Co., Inc. in
March, 1997 and subsequently verified by the Company using the Bloomberg
report.
(3) Based on a Schedule 13F filed on behalf of Brandes Investment in March 1997
and subsequently verified by the Company using the Bloomberg report.
4
<PAGE> 9
PROPOSALS TO BE VOTED ON AT THE MEETING
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of eight
directors and is divided into three classes. Each of the eight members of the
Board of Directors of the Company also presently serves as a director of the
Bank. Directors are elected for staggered terms of three years each, with the
term of office of only one of the three classes of Directors expiring each year.
Directors serve until their successors are elected and qualified.
At a meeting held on July 24, 1997, the Board of Directors of the Company
expanded the size of the Board to eight directors and appointed Richard S. Cupp
and George P. Rutland to the newly-created directorships, with terms to expire
at the annual meeting of the Company to be held in 1997 and 1999, respectively,
or until their successors are elected and qualified. For more information on the
new directors, see "Information with Respect to the Nominees, Continuing
Directors and Executive Officers." Mr. Cupp also replaced Mr. Eichinger as
President and Chief Executive Officer of the Company and the Bank as of July 24,
1997 following Mr. Eichinger's retirement. An employment agreement was entered
into between each of the Company and Bank and Mr. Cupp. Mr. Eichinger remains
the Chairman of the Board of Directors of the Company and the Bank.
The three nominees proposed for election at this Annual Meeting are J.
Robert Eichinger, Harold L. Fuller and Richard S. Cupp. In the event that any
such nominee is unable to serve or declines to serve for any reason, it is
intended that the proxies will be voted for the election of such other person as
may be designated by the present Board of Directors. The Board of Directors has
no reason to believe that any of the persons named will be unable or unwilling
to serve. UNLESS AUTHORITY TO VOTE FOR THE NOMINEE IS WITHHELD, IT IS INTENDED
THAT THE SHARES REPRESENTED BY THE ENCLOSED PROXY CARD, IF EXECUTED AND
RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES PROPOSED BY THE BOARD
OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
5
<PAGE> 10
INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS
The following table sets forth, as of the Record Date, the names of the
nominees and continuing directors and Named Executive Officers of the Company
and their ages, a brief description of their recent business experience,
including present occupations and employment, certain directorships held by
each, the year in which each became a director of the Bank or the Company, and
the year in which their terms (or in the case of the nominees, their proposed
terms) as director of the Company expire. The table also sets forth the amount
of Common Stock and the percent thereof beneficially owned by each director and
executive officer and by all directors, Named Executive Officers and executive
officers as a group as of the Record Date. Ownership information is based upon
information furnished by the respective individuals.
<TABLE>
<CAPTION>
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ------------------------ ------ ------- --------- ------------ -----------
NOMINEES
<S> <C> <C> <C> <C> <C>
Richard S. Cupp(3) 57 1997(6) 2000 46,000(4)(5) *
President and Chief Executive
Officer of the Company and the
Bank. Formerly President and
Chief Executive Officer of
Ventura County National
Bancorp, 1993-1997. Formerly
Executive Vice President of
Calfed, Inc., 1984-1992.
J. Robert Eichinger(3)
Chairman of the Board
Formerly President and Chief 66 1981 2000 99,715(4)(5) 1.6%
Executive Officer of the
Company and the Bank,
1980-1997
Harold L. Fuller 62 1993 2000 9,372(4)(5) *
Retired Partner with Deloitte &
Touche LLP and member of the
Board of Directors of Villa
Esperanza, a non-profit home
for mentally disabled persons
</TABLE>
6
<PAGE> 11
<TABLE>
<CAPTION>
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ------------------------ ------ ------- --------- ------------ -----------
CONTINUING DIRECTORS
<S> <C> <C> <C> <C> <C>
Dr. Robert K. Jabs 61 1990 1998 11,292(4)(5) *
Professor of Business at
California Baptist College
Patricia A. "Corky" Larson 69 1995 1998 6,415(4)(5) *
Executive Director of the
Coachella Valley Association
of Governments. Former
member of the Board of
Education in the Palm Springs
Unified School District and
former supervisor of the
Riverside County Board of
Supervisors.
Norman M. Coulson 64 1996 1999 5,800(4)(5) *
Retired Chairman and Chief
Executive officer of Glendale
Federal Bank, 1957-1992
George P. Rutland 65 1997(6) 1999 3,300(4)(5) *
Retired Chairman and Chief
Executive Officer of American
Custody Corp., a property
management firm, 1994-1995.
Retired Chairman, President
and Chief Executive Officer of
Northeast Federal Corp. and
Northeast Savings Bank, 1988-
1994.
Leonard E. Searl 70 1976 1999 28,933(4)(5) *
Retired from various farming
and cattle enterprises in 1988
</TABLE>
7
<PAGE> 12
<TABLE>
<CAPTION>
SHARES OF
NAME AND PRINCIPAL EXPIRATION COMMON STOCK
OCCUPATION AT PRESENT DIRECTOR OF TERM AS BENEFICIALLY PERCENT OF
AND FOR PAST FIVE YEARS AGE SINCE(1) DIRECTOR OWNED(2) CLASS
- ------------------------ ------ ------- --------- ------------ -----------
NAMED EXECUTIVE
OFFICERS WHO ARE NOT
DIRECTORS
<S> <C> <C> <C> <C> <C>
Gerald A. Agnes 38 -- -- 46,452(4)(5) *
Executive Vice President of the
Company and Executive Vice
President and Chief Operating
Officer of the Bank
Jack A. Sanden 56 -- -- 35,954(4)(5) *
Senior Vice President of the
Bank
Stock Ownership of all -- -- -- 343,022(7) 5.4%
Directors and Executive
Officers as a Group
(16 persons)
</TABLE>
- --------------------------------
* Represents less than 1.0% of the Company's voting securities.
(1) Includes years of service as a director of the Bank.
(2) Each person effectively exercises sole (or shares with spouse or other
immediate family member) voting or dispositive power as to shares reported
herein (except as noted).
(3) Mr. Eichinger retired as President and Chief Executive Officer of the
Company and the Bank on July 24, 1997. He was replaced by Mr. Cupp.
(4) Includes 30,000, 2,640, 7,906, 34,914, 3,298, 4,220, 2,839, 3,300, 22,219,
and 18,640 shares awarded to Messrs. Cupp, Coulson, Searl, Eichinger and
Fuller, Dr. Jabs, Ms. Larson, Messrs. Rutland, Agnes and Sanden pursuant to
the HF Bancorp Stock-Based Incentive Plan ("Stock Plan"). Awards to
directors and officers under the Stock Plan began vesting in five equal
annual installments commencing January 11, 1997, except that awards to Mr.
Coulson did not begin vesting until June 20, 1997 and awards to Mr. Cupp
and Mr. Rutland do not begin vesting until July 24, 1998. Participants have
voting control over all shares whether or not vested.
(5) Does not include 64,000, 8,000, 26,344, 95,220, 11,003, 14,072, 9,469,
10,000, 63,480, and 33,115 shares subject to options granted to Messrs.
Cupp, Coulson, Searl, Eichinger and Fuller, Dr. Jabs, Ms. Larson, Messrs.
Rutland, Agnes and Sanden pursuant to the Stock Plan that are not yet
exercisable and will not become exercisable within 60 days. Options began
vesting on a cumulative basis in five equal annual installments commencing
January 11, 1997, except that options granted to Mr. Coulson did not begin
vesting until June 20, 1997. Further, options granted to Mr. Cupp began
vesting in five equal annual installments commencing on the date of grant,
July 24, 1997 and options granted to Mr. Rutland begin vesting in five
equal annual installments commencing July 24, 1998.
(6) Mr. Cupp and Mr. Rutland were appointed to the Board of Directors of the
Company and the Bank by the Board on July 24, 1997.
(7) Includes 92,137 shares subject to options granted to directors and
executive officers under the Stock Option Plan which are currently
exercisable.
8
<PAGE> 13
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the Board
of Directors and through activities of its committees. The Board of Directors
meets monthly and may have additional meetings as needed. During fiscal 1997,
the Board of Directors of the Company held 15 meetings. The Board of Directors
of the Bank held 15 meetings. All of the directors of the Company and Bank
attended at least 75% of the total number of the Company's and Bank's Board
meetings held and committee meetings on which such directors served during
fiscal 1997. The Boards of Directors of the Company and the Bank maintain
committees, the nature and composition of which are described below:
AUDIT COMMITTEE. The Audit Committee of the Company consists of Messrs.
Jabs (Chairman), Fuller, Larson and Searl, all of whom are outside directors.
This committee meets as called by the Committee Chairman. The purpose of this
committee is to provide assurance that financial disclosures made by management
portray the financial condition and results of operations. The committee also
maintains a liaison with the outside auditors and reviews the adequacy of
internal controls. The Audit Committee of the Company met three times in fiscal
1997.
NOMINATING COMMITTEE. The Nominating Committee of the Company for the 1997
Annual Meeting consists of Messrs. Coulson, Eichinger, Jabs and Searl. This
Committee met once in fiscal 1997 to consider and recommend the nominees for
director to stand for election at the Company's Annual Meeting. The Company's
Certificate of Incorporation and Bylaws also provide for stockholder nominations
of directors. These provisions require such nominations to be made pursuant to
timely notice in writing to the Secretary of the Company. The stockholders'
notice of nomination must contain all information relating to the nominee that
is required to be disclosed by the Company's Bylaws and by the Securities
Exchange Act of 1934. See "Additional Information Notice of Business to be
Conducted at the Annual Meeting."
COMPENSATION COMMITTEE. The Compensation Committee of both the Company and
Bank consists of Messrs. Searl (Chairman), Coulson and Jabs. All compensation
decisions regarding executive officers of the Company for fiscal 1997 were made
by the Compensation Committee. The Compensation Committee met six times in
fiscal 1997.
DIRECTORS' COMPENSATION
DIRECTORS' FEES. Directors of the Company do not receive any fees or
retainer for serving on the Company's Board of Directors. In fiscal 1997,
non-employee directors received an annual retainer for service on the Board of
Directors of the Bank of $5,400 and a fee of $1,750 per regular Board Meeting
and $500 per special Board Meeting. All members of the Board of Directors, with
the exception of Mr. Rutland, are members of the Board of Directors of First
Hemet Corporation ("First Hemet"), a wholly-owned subsidiary of the Bank.
Committee fees of $200 per meeting are paid to non-employee directors of the
Company. One-third of the fees paid to Board members are paid by the Company and
two-thirds are paid by the Bank.
9
<PAGE> 14
DIRECTORS' RETIREMENT PLAN. The Bank and the Company maintain a retirement
plan for those directors who have completed ten years of service or who have
both attained the age of 65 and had five years of consecutive service as a
director and who were elected to the Board prior to March 31, 1995. This plan
covers a total of eleven (11) participants, seven (7) of which are retired. This
plan was terminated effective March 31, 1995 with respect to future directors.
The Directors' Retirement Plan provides that a participant will receive monthly
benefits until death equal to 60% of the basic monthly directors fee such
participant received for the last month in which he served as director. Upon the
retired Participant's death, 50% of his benefit shall continue to be paid to the
Participant's surviving spouse for the balance of the spouse's life. If the
Participant dies while still serving as a director, 50% of the monthly
retirement benefit that said Participant would have received had he retired the
day immediately preceding the date of his death shall be paid to his surviving
spouse for the balance of the spouse's life. No Participant shall be paid a
retirement benefit if he is removed from the Board for cause pursuant to Section
302 of the California Corporation's Code or an equivalent federal regulation or
statute.
1995 DIRECTORS' DEFERRED FEE STOCK UNIT PLAN. The Bank and the Company
have implemented the 1995 Directors' Deferred Fee Stock Unit Plan ("Deferred Fee
Plan") for its directors. Under the Deferred Fee Plan, directors may elect to
defer receipt of directors' fees earned by them until their service with the
Board of Directors terminates. The directors' deferred fees are credited to the
account of participating directors under the terms of the Deferred Fee Plan and
are credited with earnings based on several investment choices, including
Company Common Stock. If a participant chooses to have deferred fees credited to
a stock unit account with the Deferred Fee Plan, the participant will receive a
benefit based on the earnings from and appreciation in the stock of the Company.
STOCK PLAN. Under the Stock Plan, which amended and restated the HF
Bancorp, Inc. 1995 Master Stock Option Plan and Hemet Federal Savings and Loan
Association 1995 Master Stock Compensation Plan, each outside director who was a
director on January 11, 1996 was granted non-statutory stock options to purchase
varying amounts of Common Stock depending on each director's years of service at
an exercise price of $10.05 per share, which was the fair market value of the
shares on the date of grant (January 11, 1996). The grants to each director
included a base grant of options to purchase 10,000 shares of Common Stock and a
variable award related to years of service. Each outside director of the Company
elected subsequent to January 11, 1996 has been granted non-statutory stock
options to purchase 10,000 shares of Common Stock with an exercise price equal
to the fair market value on the date of grant. Shares granted to Messrs. Coulson
and Rutland have an exercise price of $9.50 and $14.34, respectively. Options
become exercisable in five (5) equal annual installments of 20% commencing one
year from the date of grant. In addition, each outside director who was a
director on January 11, 1996 was granted an award of 3,300 shares of Common
Stock. Additional shares were awarded to outside directors under the Stock Plan
based upon their years of service. Each outside director elected subsequent to
January 11, 1996 has been granted an award equal to 3,300 shares of Common
Stock. Awards to directors vest in five (5) equal annual installments at a rate
of 20% commencing one year from the date of grant.
10
<PAGE> 15
EXECUTIVE COMPENSATION
THE REPORT OF THE COMPENSATION COMMITTEE AND THE STOCK PERFORMANCE GRAPH
SHALL NOT BE DEEMED INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT
INCORPORATING BY REFERENCE THIS PROXY STATEMENT INTO ANY FILING UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES EXCHANGE ACT OF
1934, EXCEPT TO THE EXTENT THAT THE COMPANY SPECIFICALLY INCORPORATES THIS
INFORMATION BY REFERENCE, AND SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH
ACTS.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION. Under rules
established by the SEC, the Company is required to provide certain data and
information in regard to the compensation and benefits provided to the Company's
Chief Executive Officer and other executive officers of the Company. The
disclosure requirements for the Chief Executive Officer and other executive
officers include the use of tables and a report explaining the rationale and
consideration that led to fundamental executive compensation decisions affecting
those individuals. In fulfillment of this requirement, the Compensation
Committee of the Company and Bank (the "Committee") at the direction of the
Board of Directors, has prepared the following report for inclusion in this
proxy statement.
GENERAL. The Committee is responsible for establishing the compensation
levels and benefits for executive officers of the Company and Bank and for
reviewing recommendations of management for compensation and benefits for other
officers and employees of the Bank. The Company does not pay any cash
compensation to the executive officers of the Company for serving as such. The
Committee consists of Messrs. Searl (Chairman), Coulson and Jabs, who are
outside directors.
COMPENSATION POLICIES. The Committee has the following goals for
compensation programs impacting the executive officers of the Company and the
Bank.
o to provide compensation opportunities which are consistent with
competitive norms of the industry and the Company's level of
performance, thus allowing the Company to retain high quality
executive officers who are critical to the Company's long term
success;
o to motivate key executive officers to achieve strategic business
initiatives and reward them for their achievement; and
o to provide motivation for the executive officers to enhance
shareholder value by linking their compensation to the value of the
Company's Common Stock.
In addition, in order to align the interests and performance of its
executive officers with the long term interests of its stockholders, the Company
and the Bank adopted plans, which reward the executives for delivering long term
value to the Company and the Bank through stock ownership.
11
<PAGE> 16
The compensation package available to executive officers is composed of
the following items:
(i) base salary;
(ii) annual cash awards; and
(ii) long term incentive compensation, including option and stock awards.
Mr. J. Robert Eichinger had and Mr. Agnes has employment agreements with
the Company and the Bank which specify a minimum base salary and require
periodic review of such salary. In addition, executive officers participate in
other benefit plans available to all employees including an Employee Stock
Ownership Plan and a Defined Benefit Plan. Mr. Eichinger retired as President
and Chief Executive Officer of the Company and the Bank on July 24, 1997. Mr.
Cupp, who became President and Chief Executive Officer upon Mr. Eichinger's
retirement entered into employment agreements with each of the Company and the
Bank.
BASE SALARY. In determining salary levels, the Committee considers the
entire compensation package, including the potential equity compensation
provided under the Company's stock plans. The Committee usually meets in the
fourth quarter of each fiscal year to determine the level of any salary increase
to take effect immediately after such determination is made.
The salary levels are intended to be consistent with the competitive
practices of other comparable financial institutions and each executives' level
of responsibility. The Committee consulted surveys of compensation paid to
executive officers performing similar duties for depository institutions and
their holding companies, with particular focus on the level of compensation paid
by comparable institutions in the Bank's market area. The peer group utilized
for comparison included some, but not all, of the companies included in the peer
group used for the Stock Performance Graph. It is the Committee's goal that the
total compensation package for its executive officers be competitive with the
median (50th percentile) total compensation of the comparable institutions.
Although the Committee's decisions are discretionary and no specific
formula is used for decision making, salary increases are aimed at reflecting
the overall performance of the Company and the performance of the individual
executive officer.
ANNUAL CASH AWARDS. The Committee did not grant any discretionary cash
awards in fiscal 1997. As discussed under base salaries, the bonus awards are
intended to be consistent with competitive practices of other comparable
financial institutions and each executives' level of responsibility. Although
the decision concerning bonus awards are discretionary, the bonus awards are
aimed at reflecting the overall financial performance of the Company and the
performance of the individual executive officer.
LONG TERM INCENTIVE COMPENSATION. The Company maintains the HF Bancorp
Stock-Based Incentive Plan under which executive officers have received grants.
See "Salary Compensation Table" or Option Table. The Committee believes that
stock ownership is a significant incentive in building stockholder value and
aligning the interests of employees with those of stockholders. Stock
12
<PAGE> 17
options and stock awards under such plans were allocated by the Committee based
upon regulatory practices and polices, the practices of other recently converted
financial institutions as verified by external surveys and based upon the
executive officers' level of responsibility and contributions to the Company and
the Bank.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. After taking into
consideration the factors discussed above, including the overall compensation
package and stock based compensation awards, Mr. Eichinger's salary for fiscal
1997 was increased by 6%. He received no bonus in fiscal 1997. No specific
formula was used nor did the Committee set specified salary levels or bonus
awards based on the achievement of particular quantifiable objectives or
financial goals. Rather, the Committee considered the overall profitability of
the Company and the Bank and the contributions made to the Company and the Bank
by the Chief Executive Officer. In addition, the 119,025 options and 43,642
shares which were awarded to Mr. Eichinger in January 1996 under the Stock Plan
began vesting on January 11, 1997 in accordance with the factors discussed
above.
PERSONNEL, COMPENSATION AND BENEFITS COMMITTEE
Leonard E. Searl (Chairman)
Norman M. Coulson
Dr. Robert K. Jabs
13
<PAGE> 18
STOCK PERFORMANCE GRAPH. The following graph shows a weekly comparison of
cumulative total shareholder return on the Company's Common Stock, based on the
market price of the Common Stock with the cumulative total return of companies
in the Nasdaq Stock Market and Nasdaq Bank Stocks for the period beginning on
June 30, 1995, the day the Company's Common Stock began trading, through June
30, 1997.
COMPARISON OF CUMULATIVE TOTAL RETURNS
HF Bancorp, Inc.
June 30, 1995 - June 30, 1997
[GRAPH GOES HERE]
<TABLE>
<CAPTION>
Summary
6/30/95 9/29/95 12/29/95 3/29/96 6/28/96 9/30/96
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
HF Bancorp, Inc. 100.000 118.182 119.697 121.212 118.182 116.667
Nasdaq Stock Market 100.000 112.044 113.412 118.701 128.391 132.956
Nasdaq Bank Stocks 100.000 112.878 123.204 128.039 130.156 144.044
12/31/96 3/31/97 6/30/97
-------- ------- -------
HF Bancorp, Inc. 134.848 154.545 174.242
Nasdaq Stock Market 139.489 131.941 156.136
Nasdaq Bank Stocks 162.658 174.837 203.474
</TABLE>
Notes:
A. The lines represent quarterly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the quarterly interval, based on the fiscal year-end is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to 100.000 on 6/30/95.
14
<PAGE> 19
SUMMARY COMPENSATION TABLE. The following table shows, for the fiscal
years ended June 30, 1997, 1996 and 1995, the cash compensation paid by the
Bank, as well as certain other compensation paid or accrued for those years, to
the chief executive officer and those executive officers of the Company and the
Bank who received salary and bonus in excess of $100,000 in fiscal 1997 ("Named
Executive Officers").
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------- --------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITIONS YEAR ($) ($) ($)(1) ($)(2) (#)(3) ($)(4) ($)(5)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Robert Eichinger 1997 $212,000 - - - - - -
President, Chief 1996 199,204 - - $438,602 119,025 - -
Executive Office 1995 165,040 12,000 - - - - 21,000
and Director of the
Bank and the
Company(6)
Gerald A. Agnes 1997 $137,494 - - - - - -
Executive Vice 1996 116,850 - - $279,119 79,350 - -
President of the 1995 68,963 $3,464 - - - - -
Company and
Executive Vice
President and Chief
Operating Officer of
the Bank
- -
Jack A. Sanden 1997 $106,817 - - - - - -
Senior Vice 1996 102,590 - - $234,155 41,394 - -
President of the 1995 95,546 $5,900 - - - - -
Bank
</TABLE>
- -----------------------------------
(1) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the year; (b) payments of
above-market preferential earnings on deferred compensation; (c) payments
of earnings with respect to long-term incentive plans prior to settlement
or maturation; (d) tax payment reimbursements; or (e) preferential
discounts on stock.
(2) Pursuant to the Stock Plan, Messrs. Eichinger, Agnes and Sanden were
awarded 43,642, 27,773 and 23,299 shares of Common Stock, respectively, in
fiscal 1996. The awards vest in equal installments at a rate of 20% a year
beginning January 11, 1997. When shares become vested and are distributed,
the recipient will also receive an amount equal to accumulated dividends
and earnings thereon. Awards will become vested upon termination of
employment due to death, disability or change in control. At June 30, 1997,
the market value of the 34,914, 22,219 and 18,640 unvested shares held by
Messrs. Eichinger, Agnes and Sanden was $502,063, $319,509 and $268,043,
respectively.
(3) Includes 119,025, 79,350 and 41,394 shares subject to options granted to
Messrs. Eichinger, Agnes and Sanden, respectively, pursuant to the Stock
Plan. Options granted began vesting in equal installments at an annual rate
of 20% beginning January 11, 1997.
(4) For fiscal years 1997, 1996 and 1995, the Bank had no long-term incentive
plans, accordingly, there were no payouts or awards under any long-term
incentive plan.
(5) Reflects amounts received for serving as a director of the Bank in 1995.
Mr. Eichinger did not receive board fees for fiscal 1996 and 1997.
(6) Mr. Eichinger retired as President and Chief Executive Officer of the
Company and the Bank on July 24, 1997.
15
<PAGE> 20
EMPLOYMENT AGREEMENTS. The Bank and the Company have entered into
employment agreements with Richard S. Cupp and Gerald A. Agnes (individually,
the "Executive"). These employment agreements are intended to ensure that the
Bank and the Company will be able to maintain a stable and competent management
base. The continued success of the Bank and the Company depends, to a
significant degree, on the skills and competence of the Executive.
The employment agreements with the Bank and the Company and Mr. Cupp
provide for a two year term; the agreements with Mr. Agnes provide for a
three-year term. Commencing on the first anniversary date and continuing each
anniversary date thereafter, the respective Boards of Directors of the Bank and
Company may extend the agreements with the Executive for an additional year such
that the remaining term shall be the amount of the original term unless written
notice of non-renewal is given by the Board of Directors after conducting a
performance evaluation of the Executive. The employment agreements provide that
Mr. Cupp will receive an annual base salary of $250,800, and Mr. Agnes will
receive an annual base salary of $152,400, which will be reviewed annually by
the Board of Directors. In addition to the base salary, the agreements provide
for, among other things, disability pay, participation in stock benefit plans
and other fringe benefits applicable to executive personnel.
The agreements provide for termination of the Executive by the Bank or the
Company for cause or for disability, as defined in the agreements, at any time.
In the event the Bank or the Company chooses to terminate the Executive's
employment for reasons other than for cause or for disability, or in the event
of the Executive's resignation from the Bank and the Company upon (i) failure to
re-elect the Executive to his current offices, (ii) a material change in the
Executive's functions, duties or responsibilities, or a material reduction in
benefits or perquisites; or (iii) a relocation of the Executive's principal
place of employment that materially alters the Executive's commute; (iv)
liquidation or dissolution of the Bank or the Company, or (v) a breach of the
Employment Agreement by the Bank or the Company, the Executive or, in the event
of death, his beneficiary would be entitled to receive an amount equal to the
remaining payments under the Employment Agreement, including base salary,
bonuses, other payments and health benefits due under the remaining term of the
Employment Agreement.
If voluntary or involuntary termination of employment follows a change in
control of the Bank or the Company, as defined in the Employment Agreements, the
Executive or, in the event of death, his beneficiary, would be entitled to a
severance payment equal to the greater of (i) the payments due for the remaining
term of the agreement, or (ii) two times (three times in the case of Mr. Agnes)
the Executive's average annual compensation over the last three years. In
addition, the Bank and the Company would continue the Executive's life, health,
and disability coverage for two years for Mr. Cupp and the remaining unexpired
term of the Employment Agreement for Mr. Agnes to the extent allowed by the
plans or policies maintained by the Company or Bank from time to time. The
Bank's agreement has a similar change in control provision, however, the
Executive would only be entitled to receive a severance payment under one
agreement. Payments to the Executive under the Bank's employment agreement are
guaranteed by the Company in the event that payments or benefits are not paid by
the Bank.
16
<PAGE> 21
CHANGE IN CONTROL AGREEMENTS. The Company and the Bank have entered into
one-year change in control agreements with Mr. Sanden. Commencing on the first
annual anniversary date and continuing on each annual anniversary thereafter,
the change in control agreements may be extended by the respective Board of
Directors for an additional 12 months so that the remaining term is 12 months.
Each change in control agreement will provide that at any time following a
change in control of the Company or the Bank, if the Company or the Bank
terminates the employee's employment for any reason other than cause, or if the
employee terminates his employment following demotion, loss of title, office or
significant authority, a reduction in compensation, or relocation of the
principal place of employment, the employee or, in the event of death, the
employee's beneficiary would be entitled to receive a payment equal to the
employee's then current annual salary, including bonuses and any other cash
compensation. The Bank and the Company would also continue the employee's life,
health, and disability coverage for the remaining unexpired term of his or her
agreement to the extent allowed by the plans or policies maintained by the
Company or Bank from time to time. Payments to the employee under the Bank's
change in control agreement will be guaranteed by the Company in the event that
payments or benefits are not paid by the Bank. Change in Control Agreements have
also been entered into with other officers who are not Named Executive Officers.
Payments and benefits under the employment agreements and change in
control agreements and other benefit plans may constitute an excess parachute
payment under Section 280G of the Code, resulting in the imposition of an excise
tax on the recipient and denial of the deduction for such excess amount to the
Company and the Bank. In the event of a change in control of the Bank or
Company, the total amount of payments due under the employment agreements, based
solely on the base salary to be paid to the Executives pursuant to the terms of
the employment agreements, and excluding benefits under any employee benefit
plan would be approximately $958,800. In the event of a change in control of the
Bank or Company, the total payments due under the Change in Control Agreements
in the aggregate, based solely on the base salary paid to the seven officers
covered by the change in control agreements over the past five fiscal years and
excluding any benefits under any employee benefit plan that may be payable, are
estimated to be approximately $721,350.
DEFINED BENEFIT PLAN. The Bank previously maintained a noncontributory
defined benefit plan ("Retirement Plan"). The Retirement Plan was frozen on
August 15, 1997, and will be terminated effective September 30, 1997. All
employees who worked at the Bank for a period of one year and were with the Bank
and attained the age of 21 on August 15, 1997 were eligible to participate in
the Retirement Plan. The Bank annually contributed an amount to the Plan
necessary to satisfy requirements in accordance with the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
At the normal retirement age of 65 years, the Plan is designed to provide
a life annuity guaranteed for ten years. The accrued benefit was amended on
January 1, 1997. The accrued benefit amount is equal to one and one-half percent
of a participant's average compensation per year of credited service. This is
defined as "Formula 1". "Formula 2" provides that individuals who are
participants as of December 31, 1996 are provided a transitional Normal
Retirement Benefit for credited service and compensation through December 31,
2016 equal to three percent (3%) of such participant's average compensation per
year of credited service, not to exceed fifteen (15) such years,
17
<PAGE> 22
plus sixty-five one hundredths of one percent (.65%) of such participant's
excess compensation per year of credited service, not to exceed fifteen (15)
such years, plus one-half percent (.50%) of such participant's average
compensation per year of credited service in excess of fifteen (15), as defined
under the Plan; PROVIDED, HOWEVER, that the accrued benefit under the Plan of
such participants shall never be less than it was on December 31, 1996.
Participants in the Plan on December 31, 1996 shall be entitled to receive the
greater of a benefit calculated under Formula 1 or under Formula 2.
The Retirement Plan was amended as of January 1, 1992, to change the
definition of compensation from pay rate to actual W-2 compensation. A
participant could receive a reduced benefit at early retirement or a deferred
vested benefit commencing as of his normal retirement date.
For the Plan Year ending December 31, 1996, the annual contribution was
$460,000. In addition to a single lump sum payment for benefit amounts, payments
can be made payable in various annuity forms.
Retirement Plan benefits are also payable upon retirement due to
disability or death. A reduced benefit is payable upon early retirement at or
after age 55 and the completion of ten years of service with the Bank. Upon
termination of employment other than specified above, a participant who was
employed by the Bank for a minimum of five years has a vested interest in his
accrued benefit.
As of June 30, 1997, Messrs. Eichinger, Agnes and Sanden had 17 years and
6 months, 9 years and 7 months and 27 years and 11 months of credited service,
respectively.
HEMET FEDERAL SAVINGS AND LOAN ASSOCIATION OFFICERS DEFERRED COMPENSATION
PLAN. The Bank maintains a deferred compensation plan whereby an officer may
defer all or a portion of compensation otherwise currently payable in exchange
for the receipt at the time they cease to serve as officers of the Bank with a
benefit at the time of retirement as provided for in the plan. Amounts deferred
under this program will earn interest, compounded annually, based on the highest
certificate account rate (excluding accounts requiring deposits of $100,000 or
more) in effect on January 1 of each year of the deferral or distribution
period. The plan provides benefits are to be paid in annual installments over a
period of years determined by the Bank in its discretion.
RETIREMENT RESTORATION PLAN. The Bank maintained a non-qualified
Retirement Restoration Plan to provide a select group of management and highly
compensated employees with additional retirement benefits. The Retirement
Restoration Plan was terminated on June 30, 1997. The benefits provided under
the Plan were intended to make up the benefits lost to the Plan participants due
to application of limitations on compensation and maximum benefits applicable to
the Bank's Retirement Plan. Benefits provided under the Plan will be provided at
the same time and in the same form as the benefits will be provided under the
Bank's Retirement Plan.
The Bank has established an irrevocable grantor's trust ("rabbi trust")
funded with contributions from the Bank for the purpose of providing the
benefits promised under the terms of the Plan. The Plan participants have only
the rights of unsecured creditors with respect to the trust's assets, and will
not recognize income with respect to benefits provided by the Plan until such
benefits are received by the participants. The assets of the rabbi trust are
considered part of the
18
<PAGE> 23
general assets of the Bank and are subject to the claims of the Bank's creditors
in the event of the Bank's insolvency. Earnings on the trust's assets are
taxable to the Bank. The trustee of the trust may invest the trust's assets in
the Company's stock.
STOCK PLAN. The Company maintains the Stock Plan which provides
discretionary awards to officers and key employees as determined by a committee
of non-employee directors. At the Annual Meeting, stockholders will be asked to
approve the Amended and Restated HF Bancorp, Inc. Stock-Based Incentive Plan,
which amends and restates two stock plans the Company has maintained since
January 11, 1996. See "Proposal 2."
The following table provides certain information with respect to the
number of shares of Common Stock represented by outstanding options held by the
Named Executive Officers as of June 30, 1997. Also reported are the values for
"in-the-money" options which represent the positive spread between the exercise
price of any such existing stock options and the year end price of the Common
Stock.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION/SAR VALUES
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTION/SARS AT
FISCAL YEAR END(#) FISCAL YEAR END($)
---------------------------- ----------------------------
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- -------------------- ---------------------------- -----------------------------
<S> <C> <C>
J. Robert Eichinger. 23,805/95,220 $103,075/$412,303
Gerald A. Agnes..... 15,870/63,480 68,717/274,868
Jack A. Sanden...... 8,279/33,115 35,848/143,388
</TABLE>
- ---------------------------
(1) The options in this table have an exercise price of $10.05 and began
vesting at an annual rate of 20% beginning January 11, 1997. The options
will expire ten (10) years from the date of grant.
(2) Based on market value of the underlying stock at the fiscal year end,
minus the exercise price. The market price on June 30, 1997 was $14.38.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Bank provides loans and extensions of credit to its directors and
officers. These loans are made in the ordinary course of business, are made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do not
involve more than the normal risk of collectibility or present other unfavorable
features. As of June 30, 1997, two of the Bank's executive officers had loans
outstanding, whose individual aggregate indebtedness to the Bank exceeded
$60,000, totaling $260,000 in the aggregate. All such loans are current and were
made by the Bank in the ordinary course of business and were not made with
favorable terms nor did they involve more than the normal risk of collectibility
or contain unfavorable features.
19
<PAGE> 24
PROPOSAL 2. AMENDMENT OF THE AMENDED AND RESTATED
HF BANCORP, INC. STOCK-BASED INCENTIVE PLAN
The Board of Directors of HF Bancorp, Inc. adopted the Amended and
Restated HF Bancorp, Inc. Stock-Based Incentive Plan (the "Plan") on May 22,
1997 and is presenting it for ratification by the Company's stockholders at the
Annual Meeting. The Plan amends and restates the HF Bancorp, Inc. 1995 Master
Stock Option Plan and amends the Hemet Federal Savings and Loan Association 1995
Master Stock Compensation Plan and merges that plan with and into the Amended
and Restated Stock-Based Incentive Plan. The Board of Directors determined that
it was in the best interests of the Company and the Bank to amend and restate
the Plan to, among other things, reduce the expenses and complexity associated
with administering two separate plans, provide additional benefits that were not
available when the two 1995 plans were adopted, including the acceleration of
the vesting of awards and stock options following a change in control of the
Company or Bank, and to eliminate a number of outdated regulatory requirements
no longer necessary due to recent amendments to Section 16(b) of the Securities
Exchange Act of 1934 (the "Exchange Act").
At September 18, 1997, options covering 643,185 of the Company's Common
Stock had been granted and 18,065 shares (other than shares that might in the
future be returned to the Plan as a result of cancellation or expiration of
options) remained available to satisfy options granted in the future under the
Plan. In September 1997, the Board approved an amendment to the Plan, subject to
stockholder approval, to enhance the flexibility of the Board and Compensation
Committee in granting stock options to the Company's officers, employees and
directors (the "September 1997 Amendment"). The September 1997 Amendment would,
if approved by stockholders, increase the number of shares authorized for
issuance upon the exercise of options under the Plan by 150,000 shares from a
total of 661,250 to 811,250 shares. All of the new 150,000 options would be
available for incentive stock option treatment under Section 422 of the Internal
Revenue Code. The Board adopted this amendment to ensure the Company can
continue to grant stock options at levels determined appropriate by the Board to
attract and retain qualified and competent employees and directors.
Due to the number of amendments that have been made to the Plan, the
Company is presenting the Plan to stockholders for stockholder ratification as
well as requesting stockholder approval of the September 1997 Amendment.
The following is a summary of the Plan, which is qualified in its entirety
by the complete provisions of the Plan attached as Appendix A.
GENERAL
The Plan authorizes the granting of options to purchase Common Stock,
option-related awards and awards of Common Stock (collectively, "Awards").
Subject to certain adjustments to prevent dilution of Awards to participants,
the maximum number of shares currently available for Awards under the Plan is
859,625 shares. The maximum number of shares currently reserved for purchase
pursuant to exercise of options and option-related Awards which may be granted
under the
20
<PAGE> 25
Plan is 661,250 shares. The maximum number of the shares currently reserved for
the award of shares of Common Stock ("Stock Awards") is 198,375 shares. At
September 18, 1997, 643,185 options had been granted to participants and Stock
Awards for 192,481 shares of stock had been granted to participants pursuant to
the Stock Plan. If the September 1997 Amendment to the Plan that would increase
the number of options available for grant under the Plan is approved, there
would be a total of 168,065 options available for future grant under the Plan
(other than shares that might in the future be returned to the Plan as a result
of cancellation or expiration of options). All officers, other employees and
non-employee directors, including advisory directors of the Company and its
affiliates are eligible to receive Awards under the Plan. The Plan is
administered by a committee (the "Committee"). Authorized but unissued shares or
shares previously issued and reacquired by the Company may be used to satisfy
Awards under the Plan.
AWARDS TO EMPLOYEES
TYPES OF AWARDS. The Plan authorizes the grant of Awards to employees in
the form of: (i) options to purchase the Company's Common Stock intended to
qualify as incentive stock options under Section 422 of the Code (options which
afford tax benefits to the recipients upon compliance with certain conditions
and which do not result in tax deductions to the Company), referred to as
"Incentive Stock Options" or "ISOs"; (ii) options that do not so qualify
(options which do not afford income tax benefits to recipients, but which may
provide tax deductions to the Company), referred to as "Non-statutory Stock
Options" or "NSOs"; (iii) limited rights which are exercisable only upon a
change in control of the Company (as defined in the Plan) ("Limited Rights");
and (iv) Stock Awards, which provide a grant of Common Stock that may vest over
time.
OPTIONS. The Committee has the discretion to award Incentive Stock Options
or Non-statutory Options to employees, while only Non-statutory Stock Options
may be awarded to non-employee directors. Pursuant to the Plan, the Committee
has the authority to determine the date or dates on which each stock option will
become exercisable. In order to qualify as Incentive Stock Options under Section
422 of the Code, the exercise price must not be less than 100% of the fair
market value on the date of grant. Incentive Stock Options granted to any person
who is the beneficial owner of more than 10% of the outstanding voting stock may
be exercised only for a period of five years from the date of grant and the
exercise price must be at least equal to 110% of the fair market value of the
underlying Common Stock on the date of grant. The exercise price may be paid in
cash or in Common Stock at the discretion of the Committee. See "Payout
Alternatives" and "Alternative Option Payments."
TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Committee,
upon termination of an employee's services for any reason other than death,
disability or termination for cause, the Incentive Stock Options shall be
exercisable for a period of three months following termination, except that in
the event of termination of a participant's employment due to retirement, the
participant shall have up to one year following the participant's cessation of
employment to exercise any Incentive Stock Options exercisable on that date and
if exercised after three months following termination due to retirement, the
Incentive Stock Options shall be redesignated as Non-statutory Stock Options.
In the event of termination for cause, all rights under any Incentive Stock
Options granted shall expire immediately upon termination. Notwithstanding the
foregoing, the
21
<PAGE> 26
Amended and Restated Stock Plan now provides that in the event of termination
following a change in control of the Company or the Bank, as well as the case of
death or disability, options will become fully vested and shall be exercisable
for up to one year thereafter; provided that options not exercised within three
months following a change in control shall be redesignated as Non-statutory
Stock Options.
LIMITED RIGHTS. Limited Rights are related to specific options granted and
become exercisable in the event of a change in control of the Bank or the
Company. Upon exercise, the optionee will be entitled to receive in lieu of
purchasing the stock underlying the option, a lump sum cash payment equal to the
difference between the exercise price of the related option and the fair market
value of the shares of Common Stock subject to the option on the date of
exercise of the right less any applicable tax withholding.
STOCK AWARDS. The Plan also authorizes the granting of Stock Awards to
employees and directors. The Committee has the authority to determine the dates
on which Stock Awards granted will vest. The Amended and Restated Stock Plan now
provides that all Stock Award grants immediately vest upon termination of
employment following a change in control of the Company or the Bank, as well as
following death or disability. Under the Plan the vesting of Stock Awards may
also be made contingent upon the attainment of certain performance goals by the
Company, Bank or grantee, which performance goals, if any, would be established
by the Committee. An agreement setting forth the terms of the Stock Awards
("Stock Award Agreement") shall set forth the vesting period and performance
goals that must be attained. The performance goals may be set by the Committee
on an individual basis, for all stock Awards made during a given period of time,
or for all Stock Awards for indefinite periods. A Stock Award may only be
granted from the shares reserved and available for grant under the Plan. No
Stock Award that is subject to a performance goal is to be distributed to the
employee until the Committee confirms that the underlying performance goal has
been achieved. Stock Awards currently outstanding are not subject to performance
goals.
Stock Awards are generally nontransferable and nonassignable as provided
in the Plan. The Committee has the power, under the Plan, to permit transfers.
When plan shares are distributed in accordance with the Plan, the recipients
will also receive amounts equal to accumulated cash and stock dividends (if any)
with respect thereto plus earnings thereon minus any required tax withholding
amounts. Prior to vesting, recipients of Stock Awards may direct the voting of
shares of Common Stock granted to them and held in the trust. Shares of Common
Stock held by the Plan trust which have not been allocated or for which voting
has not been directed are voted by the trustee in the same proportion as the
awarded shares are voted in accordance with the directions given by all
recipients of Stock Awards.
TAX TREATMENT
STOCK OPTIONS. An optionee will generally not be deemed to have recognized
taxable income upon grant or exercise of any Incentive Stock Option, provided
that shares transferred in connection with the exercise are not disposed of by
the optionee for at least one year after the date the shares are transferred in
connection with the exercise of the option and two years after the date
22
<PAGE> 27
of grant of the options. If the holding periods are satisfied, upon disposal of
the shares, the aggregate difference between the per share option exercise price
and the fair market value of the Common Stock is recognized as income taxable at
long term capital gains rates. No compensation deduction may be taken by the
Company as a result of the grant or exercise of Incentive Stock Options,
assuming those holding periods are met.
In the case of the exercise of a Non-statutory Stock Option, an optionee
will be deemed to have received ordinary income upon exercise of the stock
option in an amount equal to the aggregate amount by which the per share
exercise price is exceeded by the fair market value of the Common Stock. In the
event shares received through the exercise of an Incentive Stock Option are
disposed of prior to the satisfaction of the holding periods (a "disqualifying
disposition"), the exercise of the option will be treated as the exercise of a
Non-statutory Stock Option, except that the optionee will recognize the ordinary
income for the year in which the disqualifying disposition occurs. The amount of
any ordinary income deemed to have been received by an optionee upon the
exercise of a Non-statutory Stock Option or due to a disqualifying disposition
will be a deductible expense of the Company for tax purposes.
In the case of Limited Rights, the option holder would have to include the
amount paid to him upon exercise in his gross income for federal income tax
purposes in the year in which the payment is made and the Company would be
entitled to a deduction for federal income tax purposes of the amount paid.
STOCK AWARDS. When shares of Common Stock, as Stock Awards, are
distributed, the recipient is deemed to receive ordinary income equal to the
fair market value of such shares at the date of distribution plus any dividends
and earnings on such shares (provided such date is more than six months after
the date of grant) and the Company is permitted a commensurate compensation
expense deduction for income tax purposes.
PAYOUT ALTERNATIVES
The Committee has the sole discretion to determine what form of payment it
shall use in distributing payments for all Awards. If the Committee requests any
or all participants to make an election as to form of payment, it shall not be
considered bound by the election. Any shares of Common Stock tendered in payment
of an obligation arising under the Plan or applied to any tax withholding
amounts shall be valued at the fair market value of the Common Stock. The
Committee may use treasury stock, authorized but unissued stock or may direct
the market purchase of shares of Common Stock to satisfy its obligations under
the Plan.
ALTERNATE OPTION PAYMENTS
The Committee also has the sole discretion to determine the form of
payment for the exercise of an option. The Committee may indicate acceptable
forms in the Award Agreement covering such options or may reserve its decision
to the time of exercise. No option is to be considered exercised until payment
in full is accepted by the Committee. The Committee may permit the following
forms of payment for options: (a) in cash or by certified check; (b) through
borrowed funds, to the extent
23
<PAGE> 28
permitted by law; or (c) by tendering previously acquired shares of Common
Stock. Any shares of Common Stock tendered in payment of the exercise price of
an option shall be valued at the Fair Market Value of the Common Stock on the
date prior to the date of exercise.
AMENDMENT
The Board of Directors may amend the Plan in any respect, at any time,
provided that no amendment may affect the rights of an Awardholder without his
or her permission.
ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company, or in the event a
capital distribution is made, the Company may make such adjustments to
previously granted Awards, to prevent dilution, diminution or enlargement of the
rights of the Awardholder. All Awards under this Plan shall be binding upon any
successors or assigns of the Company.
NONTRANSFERABILITY
Unless determined otherwise by the Committee, no Award under the Plan
shall be transferable by the recipient other than by will or the laws of
intestate succession or pursuant to a qualified domestic relations order. With
the consent of the Committee, an employee or Outside Director may designate a
person or his or her estate as beneficiary of any award to which the recipient
would then be entitled, in the event of the death of the employee.
STOCKHOLDER VOTE
Stockholders are being requested to ratify all amendments to the Plan and
specifically approve the proposed September 1997 Amendment to the Plan that
would increase the aggregate number of shares authorized for issuance under the
Plan upon the award of stock options and subsequent exercise of such stock
options by participants. If stockholders fail to approve Proposal 2, the Plan in
the form attached hereto, will remain in full force and effect and the number of
shares authorized for issuance under the Plan through the exercise of stock
options granted thereunder will not be increased but will remain at 661,250
shares. The affirmative vote of a majority of the shares present at the Annual
Meeting and eligible to be cast on Proposal 2 is required to ratify and approve
the Plan as amended.
24
<PAGE> 29
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD, IF EXECUTED AND RETURNED, WILL BE VOTED "FOR" PROPOSAL 2.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE
AMENDED AND RESTATED HF BANCORP, INC. STOCK-BASED INCENTIVE PLAN, AND AMENDMENT
OF THE PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER
UPON THE EXERCISE OF STOCK OPTIONS GRANTED THEREUNDER.
PROPOSAL 3. RATIFICATION OF APPOINTMENT
OF INDEPENDENT AUDITORS
The Company's independent auditors for the fiscal year ended June 30, 1997
were Deloitte & Touche LLP. The Company's Board of Directors has reappointed
Deloitte & Touche LLP to continue as independent auditors for the Bank and the
Company for the fiscal year ending June 30, 1998 subject to ratification of such
appointment by the stockholders.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions from
stockholders present at the Annual Meeting.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY CARD WILL BE VOTED FOR RATIFICATION OF THE APPOINTMENT OF DELOITTE &
TOUCHE LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
ADDITIONAL INFORMATION
STOCKHOLDER PROPOSALS
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the Annual Meeting of Stockholders to be held in 1998, a
stockholder proposal must be received by the Secretary of the Company at the
address set forth on the first page of this Proxy Statement not later than May
27, 1998. Any such proposal will be subject to 17 C.F.R. Section 240.14a-8 of
the Rules and Regulations under the Securities Exchange Act of 1934, as amended.
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<PAGE> 30
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING
The Board of Directors knows of no business which will be presented for
consideration at the Meeting other than as stated in the Notice of Annual
Meeting of Stockholders. If, however, other matters are properly brought before
the Annual Meeting, it is the intention of the persons named in the accompanying
proxy to vote the shares represented thereby on such matters in accordance with
their best judgment.
Whether or not you intend to be present at the Annual Meeting, you are
urged to return your proxy card promptly. If you are then present at the Annual
Meeting and wish to vote your shares in person, your original proxy may be
revoked by voting at the Annual Meeting.
By Order of the Board of Directors
/s/ Janet E. Riley
Janet E. Riley
CORPORATE SECRETARY
Hemet, California
September 25, 1997
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
26
<PAGE> 31
AMENDED AND RESTATED
HF BANCORP, INC.
STOCK-BASED INCENTIVE PLAN
The Amended and Restated HF Bancorp, Inc. Stock-Based Incentive Plan is
effective as of May 22, 1997 and amends the HF Bancorp, Inc. 1995 Master Stock
Option Plan and reflects the Board of Director's decision to merge the HF
Bancorp, Inc. 1995 Master Stock Compensation Plan with and into the Amended and
Restated HF Bancorp, Inc. Stock-Based Incentive Plan, with certain amendments to
the provisions of the HF Bancorp, Inc. 1995 Master Stock Compensation Plan
approved by the Board of Directors.
1. DEFINITIONS.
-----------
(a) "Affiliate" means (i) a member of a controlled group of corporations
of which the Holding Company is a member or (ii) an unincorporated trade or
business which is under common control with the Holding Company as determined in
accordance with Section 414(c) of the Code and the regulations issued
thereunder. For purposes hereof, a "controlled group of corporations" shall mean
a controlled group of corporations as defined in Section 1563(a) of the Code
determined without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Alternate Option Payment Mechanism" refers to one of several methods
available to a Participant to fund the exercise of a stock option set out in
Section 13 hereof. These mechanisms include: broker assisted cashless exercise
and stock for stock exchange.
(c) "Award" means a grant of one or some combination of one or more
Non-statutory Stock Options, Incentive Stock Options, Option related rights and
Stock Awards under the provisions of this Plan.
(d) "Association" means Hemet Federal Savings and Loan Association.
(e) "Board of Directors" or "Board" means the board of directors of the
Holding Company or the Association.
(f) "Change in Control" means a change in control of the Association or
Holding Company of a nature that; (i) would be required to be reported in
response to Item 1 of the current report on Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) results in
a Change in Control within the meaning of the Home Owners' Loan Act of 1933, as
amended ("HOLA") and the Rules and Regulations promulgated by the Office of
Thrift Supervision ("OTS") (or its predecessor agency), as in effect on the date
hereof (provided, that in applying the definition of change in control as set
forth under such rules and regulations the Board shall substitute its judgment
for that of the OTS); or (iii) without limitation such a Change in Control shall
be deemed to have occurred at such time as (A) any "person" (as the term is used
in Sections 13(d) and
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14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Association or the Holding Company representing 20% or more of the Association's
or the Holding Company's outstanding securities except for any securities of the
Association purchased by the Holding Company and any securities purchased by any
tax qualified employee benefit plan of the Association; or (B) individuals who
constitute the Board on the date hereof (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least three-quarters of the directors comprising the Incumbent
Board, or whose nomination for election by the Holding Company's stockholders
was approved by the same Nominating Committee serving under an Incumbent Board,
shall be, for purposes of this clause (B), considered as though he were a member
of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation,
sale of all or substantially all the assets of the Association or the Holding
Company or similar transaction occurs in which the Association or Holding
Company is not the resulting entity; or (D) a solicitation of shareholders of
the Holding Company, by someone other than the current management of the Holding
Company, seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Holding Company or Association or similar transaction with
one or more corporations, as a result of which the outstanding shares of the
class of securities then subject to the plan are exchanged for or converted into
cash or property or securities not issued by the Association or the Holding
Company; or (E) a tender offer is made for 20% or more of the voting securities
of the Association or the Holding Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means a committee consisting of the entire Board of
Directors or consisting solely of two or more members of the Board of Directors
who are defined as NonEmployee Directors as such term is defined under Rule
16b-3(b)(3)(i) under the Exchange Act as promulgated by the Securities and
Exchange Commission.
(i) "Common Stock" means the Common Stock of the Holding Company, par
value, $.01 per share or any stock exchanged for shares of Common Stock pursuant
to Section 17 hereof.
(j) "Date of Grant" means the effective date of an Award.
(k) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Participant to perform the work
customarily assigned to him or, in the case of a Director, to serve on the
Board. Additionally, a medical doctor selected or approved by the Board of
Directors must advise the Committee that it is either not possible to determine
when such Disability will terminate or that it appears probable that such
Disability will be permanent during the remainder of said Participant's
lifetime.
(l) "Effective Date" means January 11, 1996, the effective date of the
Plan.
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<PAGE> 33
(m) "Employee" means any person who is currently employed by the Holding
Company or an Affiliate, including officers, but such term shall not include
Outside Directors.
(n) "Employee Participant" means an Employee who holds an outstanding
Award under the terms of the Plan.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(p) "Exercise Price" means the purchase price per share of Common Stock
deliverable upon the exercise of each Option in order for the option to be
exchanged for shares of Common Stock.
(q) "Fair Market Value" means, when used in connection with the Common
Stock on a certain date, the average of the high and low sales prices of the
Common Stock as reported by the American Stock Exchange ("AMEX") or the New York
Stock Exchange ("NYSE") or other national securities exchange, which is the
primary trading market for the Common Stock as reported by the Nasdaq Stock
Market ("NASDAQ") if the NASDAQ serves as the primary trading market for the
Common Stock, each as published in the Wall Street Journal, if published, on
such date or, if the Common Stock was not traded on such date, on the next
preceding day on which the Common Stock was traded thereon or the last previous
date on which a sale was reported. If the Common Stock is not traded on a
national securities exchange or the AMEX, NASDAQ or the NYSE, the Fair Market
Value of the Common Stock is the value so determined by the Board in good faith.
(r) "Holding Company" means HF Bancorp, Inc.
(s) "Incentive Stock Option" means an Option granted by the Committee to
an Employee Participant, which Option is designated by the Committee as an
Incentive Stock Option pursuant to Section 7 hereof and is intended to be such
under Section 422 of the Code.
(t) "Limited Right" means the right to receive an amount of cash based
upon the terms set forth in Section 8 hereof.
(u) "Non-statutory Stock Option" means an Option to a Participant pursuant
to Section 6 hereof, which is not designated by the Committee as an Incentive
Stock Option or which is redesignated by the Committee as a Non-statutory Stock
Option or which is designated an Incentive Stock Option under Section 7 hereof,
but does not meet the requirements of such under Section 422 of the Code.
(v) "Option" means the right to buy a fixed amount of Common Stock at the
Exercise Price within a limited period of time designated as the term of the
option as granted under Section 6 or 7 hereof.
(w) "Outside Director" means a member of the Board of Directors of the
Holding Company or its Affiliates, who is not also an Employee.
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<PAGE> 34
(x) "Outside Director Participant" means an Outside Director who holds an
outstanding Award under the terms of the Plan.
(y) "Participant(s)" means collectively an Employee Participant and/or an
Outside Director Participant who hold(s) outstanding Awards under the terms of
the Plan.
(aa) "Plan" means the HF Bancorp, Inc. 1995 Master Stock Option Plan and
the 1995 Hemet Federal Savings and Loan Association 1995 Master Stock
Compensation Plan originally effective on January 11, 1996 and subsequently
amended and restated effective May 22, 1997 and renamed the Amended and Restated
HF Bancorp, Inc. Stock-Based Incentive Plan.
(bb) "Retirement" with respect to an Employee Participant means
termination of employment which constitutes retirement under any tax qualified
plan maintained by the Association or by reaching age 60. However, "Retirement"
will not be deemed to have occurred for purposes of this Plan if a Participant
continues to serve as an officer, whether full or part-time, as a consultant or
on the Board of Directors of the Holding Company or its Affiliates even if such
Participant is receiving retirement benefits under any retirement plan of the
Holding Company or its Affiliates. With respect to an Outside Director,
"Retirement" means the termination of service from the Board of Directors of the
Holding Company or its Affiliates following written notice to the Board, as a
whole, of such Outside Director's intention to retire, except that an Outside
Director shall not be deemed to have "retired" for purposes of the Plan in the
event he continues to serve as a consultant to the Board or as an advisory
director.
(cc) "Stock Awards" are Awards of Common Stock which may vest immediately
or over a period of time. Vesting of Stock Awards under Section 9 hereof may be
contingent upon the occurrence of specified events or the attainment of
specified performance goals as determined by the Committee.
(dd) "Termination for Cause" shall mean, in the case of a Director,
removal from the Board of Directors, or, in the case of an employee, termination
of employment, in both such cases as determined by the Board of Directors,
because of a material loss to the Holding Company or one of its Affiliates
caused by the Participant's intentional failure to perform stated duties,
personal dishonesty, willful violation of any law, rule, regulation, (other than
traffic violations or similar offenses) or final cease and desist order. No act,
or the failure to act, on Participant's part shall be "willful" unless done, or
omitted to be done, not in good faith and without reasonable belief that the
action or omission was in the best interest of the Holding Company or its
Affiliates.
(ee) "Trust" means a trust established by the Board in connection with
this Plan to hold Plan assets for the purposes set forth herein.
(ff) "Trustee" means that person or persons and entity or entities
approved by the Board to hold legal title to any of the Trust assets for the
purposes set forth herein.
A-4
<PAGE> 35
2. ADMINISTRATION.
--------------
(a) The Plan shall be administered by the Committee. The Committee is
authorized, subject to the provisions of the Plan, to grant awards to
Participants and establish such rules and regulations as it deems necessary for
the proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it deems necessary or advisable. All
such determinations and interpretations made by the Committee shall be binding
and conclusive on all Participants in the Plan and on their legal
representatives and beneficiaries.
(b) Awards to Outside Directors of the Holding Company or its Affiliates
shall be granted by the Board of Directors or the Committee, pursuant to the
terms of this Plan.
(c) Actual distribution of the Award requires no, nor allows any,
discretion by the Trustee.
3. TYPES OF AWARDS AND RELATED RIGHTS.
----------------------------------
The following Awards and Option related rights as described below in
Paragraphs 6 through 9 hereof may be granted under the Plan:
(a) Non-statutory Stock Options
(b) Incentive Stock Options
(c) Limited Rights
(d) Stock Awards
4. STOCK SUBJECT TO THE PLAN.
-------------------------
Subject to adjustment as provided in Section 15 hereof, the maximum number
of shares hereby reserved for Awards under the Plan is 859,625 shares of Common
Stock. Subject to adjustment as provided in Section 15 hereof, the maximum
number of shares of Common Stock reserved hereby for purchase pursuant to the
exercise of Options and Option-related Awards granted under the Plan is 661,250
shares of Common Stock; 547,550 shares shall be Incentive Stock Options and
113,700 shall be Non-statutory Stock Options. The maximum number of shares of
Common Stock reserved for Award as Stock Awards is 198,375 shares. These shares
of Common Stock may be either authorized but unissued shares or authorized
shares previously issued and reacquired by the Holding Company or purchased by
the Trustee. To the extent that Options and Stock Awards are granted under the
Plan, the shares underlying such Awards will be unavailable for any other use
including future grants under the Plan except that, to the extent that Stock
Awards, Options, or Limited Rights terminate, expire, or are forfeited without
having been distributed or exercised, respectively, (or in cases where a Limited
Right is received in lieu of the exercise of such option), new Awards may be
made with respect to those shares underlying such terminated, expired or
forfeited Options or Stock Awards. Shares underlying Options which Options are
cancelled upon the exercise of accompanying Limited Rights are not available for
future grants.
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<PAGE> 36
5. ELIGIBILITY.
-----------
Subject to the terms herein, all Employees and Outside Directors shall be
eligible to receive Awards under the Plan.
6. NON-STATUTORY STOCK OPTIONS.
---------------------------
The Committee or the Board of Directors may, subject to the limitations of
the Plan and the availability of shares reserved but unawarded in the Plan, from
time to time, grant Non-statutory Stock Options to Employees and Outside
Directors, upon such terms and conditions as the Committee may determine and in
exchange for and upon surrender of previously granted Awards under this Plan
under such terms and conditions as the Committee or Board may determine.
Non-statutory Stock Options granted under this Plan are subject to the following
terms and conditions:
(a) Exercise Price. The Exercise Price of each Non-statutory Stock Option
--------------
shall be determined by the Committee. Such Exercise Price shall not be less than
100% of the Fair Market Value of the Holding Company's Common Stock on the Date
of Grant. Shares of Common Stock underlying a Non-statutory Stock Option may be
purchased only upon full payment of the Exercise Price in cash or by means of an
Alternate Option Payment as permitted in Section 11 hereof.
(b) Terms of Non-statutory Stock Options. The term during which each
---------------------------------------
Non-statutory Stock Option may be exercised shall be determined by the
Committee, but in no event shall a Non-statutory Stock Option be exercisable in
whole or in part more than 10 years from the Date of Grant. The Committee shall
determine the date on which each Non-statutory Stock Option shall become
exercisable. The Committee may also determine as of the Date of Grant any other
specific conditions or specific performance goals that must be satisfied prior
to the Non-statutory Stock Option becoming exercisable. The shares of Common
Stock underlying each Non-statutory Stock Option installment may be purchased in
whole or in part by the Participant at any time during the term of such
Non-statutory Stock Option after such installment becomes exercisable. The
Committee may, in its sole discretion, accelerate the time at which any
Non-statutory Stock Option may be exercised in whole or in part. The
acceleration of vesting of any Non-statutory Stock Option under the authority of
this paragraph shall create no right, expectation or reliance on the part of any
other Participant or that certain Participant regarding any other unaccelerated
Non-statutory Stock Options. Unless determined otherwise by the Committee and
except in the event of the Participant's death or pursuant to a domestic
relations order, a Non-statutory Stock Option is not transferable and may be
exercisable in his lifetime only by the Participant to whom it is granted. Upon
the death of a Participant, a Non-statutory Stock Option is transferable by will
or the laws of descent and distribution.
(c) NSO Agreement. The terms and conditions of any Non-statutory Stock
--------------
Option granted shall be evidenced by an agreement (the "NSO Agreement") which
shall be subject to the terms and conditions of the Plan.
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(d) Termination of Employment or Service. Unless otherwise determined by
------------------------------------
the Committee and except as provided in Section 6(e) hereof, upon the
termination of a Participant's employment or service for any reason other than
Disability, death or Termination for Cause, the Participant's Non-statutory
Stock Options shall be exercisable only as to those shares that were immediately
exercisable by the Participant at the date of termination and only for a period
of three months following termination, except that in the event of termination
of a Participant's employment or service due to Retirement, the Participant
shall have up to one year following the Participant's cessation of employment or
service to exercise the Participant's immediately exercisable Non- statutory
Options. Notwithstanding any provisions set forth herein or contained in any NSO
Agreement relating to an award of a Non-statutory Stock Option, in the event of
termination of the Participant's employment or service for Disability or death,
all Non-statutory Stock Options held by such Participant shall immediately vest
and be exercisable for one year after such termination of service, and, in the
event of a Termination for Cause, all rights under the Participant's
Non-statutory Stock Options shall expire immediately upon such Termination for
Cause. Notwithstanding the above, in no event shall any Non-statutory Stock
Options be exercisable beyond the expiration of the Non-statutory Stock Option
term.
(e) Change in Control and Retirement. Unless otherwise determined by the
--------------------------------
Committee, in the event of the termination of the Participant's employment or
service as a result of the Participant's Retirement or following a Change in
Control, all Non-statutory Stock Options held by the Participant, whether or not
vested at such time, shall become vested to the Participant or his legal
representatives or beneficiaries upon the date of the termination of employment
or service.
7. INCENTIVE STOCK OPTIONS.
-----------------------
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded in the Plan, from time to time,
grant Incentive Stock Options to Employees upon such terms and conditions as the
Committee may determine. Incentive Stock Options granted pursuant to the Plan
shall be subject to the following terms and conditions:
(a) Exercise Price. The Exercise Price of each Incentive Stock Option
---------------
shall be not less than 100% of the Fair Market Value of the Common Stock on the
Date of Grant. However, if at the time an Incentive Stock Option is granted to
an Employee Participant, such Employee Participant owns Common Stock
representing more than 10% of the total combined voting securities of the
Holding Company (or, under Section 424(d) of the Code, is deemed to own Common
Stock representing more than 10% of the total combined voting power of all
classes of stock of the Holding Company, by reason of the ownership of such
classes of stock, directly or indirectly, by or for any brother, sister, spouse,
ancestor or lineal descendent of such Employee Participant, or by or for any
corporation, partnership, estate or trust of which such Employee Participant is
a shareholder, partner or beneficiary), ("10% Owner"), the Exercise Price per
share of Common Stock deliverable upon the exercise of each Incentive Stock
Option shall not be less than 110% of the Fair Market Value of the Common Stock
on the Date of Grant. Shares may be purchased only upon payment of the full
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<PAGE> 38
Exercise Price in cash or by means of an Alternate Option Payment as permitted
in Section 11 hereof.
(b) Amounts of Incentive Stock Options. Incentive Stock Options may be
------------------------------------
granted to any Employee in such amounts as determined by the Committee; provided
that the amount granted is consistent with the terms of Section 422 of the Code.
In the case of an Option intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the Option is granted) of
the Common Stock with respect to which Incentive Stock Options granted are
exercisable for the first time by the Employee Participant during any calendar
year (under all plans of the Employee Participant's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000. The provisions of
this Section 7(b) shall be construed and applied in accordance with Section
422(d) of the Code and the regulations, if any, promulgated thereunder. To the
extent an Award of an Incentive Stock Option under this Section 7 exceeds this
$100,000 limit, the portion of the Award in excess of such limit shall be deemed
a Non-statutory Stock Option. The Committee shall have discretion to redesignate
Options originally granted as Incentive Stock Options as Non-Statutory Stock
Options. Such redesignation shall not be deemed to be a new grant or a regrant
of such Options. Such Non-statutory Stock Options shall be subject to Section 6
hereof.
(c) Terms of Incentive Stock Options. The term during which each Incentive
--------------------------------
Stock Option may be exercised shall be determined by the Committee, but in no
event shall an Incentive Stock Option be exercisable in whole or in part more
than 10 years from the Date of Grant. If at the time an Incentive Stock Option
is granted to an Employee Participant, he or she is a 10% Owner, the Incentive
Stock Option granted to such Employee Participant shall not be exercisable after
the expiration of five years from the Date of Grant. No Incentive Stock Option
is transferable except by will or the laws of descent and distribution and is
exercisable in his lifetime only by the Employee Participant to whom it is
granted. The designation of a beneficiary does not constitute a transfer.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable. The Committee may also determine as of the Date
of Grant any other specific conditions or specific performance goals which must
be satisfied prior to the Incentive Stock Option becoming exercisable. The
shares comprising each installment may be purchased in whole or in part at any
time during the term of such Incentive Stock Option after such installment
becomes exercisable. The Committee may, in its sole discretion, accelerate the
time at which any Incentive Stock Option may be exercised in whole or in part.
The acceleration of vesting of any Incentive Stock Option under the authority of
this paragraph shall not create a right, expectation or reliance on the part of
any other Participant or that certain Participant regarding any other
unaccelerated Incentive Stock Options.
(d) ISO Agreement. The terms and conditions of any Incentive Stock Option
-------------
granted shall be evidenced by an agreement (the "ISO Agreement") which shall be
subject to the terms and conditions of the Plan.
A-8
<PAGE> 39
(e) Termination of Employment. Unless otherwise determined by the
---------------------------
Committee and except as provided in Section 7(f) hereof, and upon the
termination of an Employee Participant's employment for any reason other than
Disability, death or Termination for Cause, the Employee Participant's Incentive
Stock Options shall be exercisable only as to those shares that were immediately
exercisable by the Participant at the date of termination and only for a period
of three months following termination, except that in the event of the
termination of a Participant's employment due to Retirement, the Participant
shall have up to one year following Participant's cessation of employment to
exercise any Incentive Stock Options exercisable on that date. Notwithstanding
any provisions set forth herein or contained in any ISO Agreement relating to an
award of an Incentive Stock Option, in the event of termination of the Employee
Participant's employment for Disability or death, all Incentive Stock Options
held by such Employee Participant shall immediately vest and be exercisable for
one year after such termination (however, in the event of Retirement, exercising
after three months will result in loss of incentive stock option treatment under
the Code), and, in the event of Termination for Cause, all rights under the
Employee Participant's Incentive Stock Options shall expire immediately upon
termination. In no event shall an Incentive Stock Option be exercisable beyond
the expiration of the Incentive Stock Option term.
(f) Change in Control and Retirement. Unless otherwise determined by the
--------------------------------
Committee, in the event of the termination of the Participant's employment or
service as a result of the Participant's Retirement or following a Change in
Control, all Incentive Stock Options held by the Participant, whether or not
vested at such time, shall become vested to the Participant or his legal
representatives or beneficiaries upon the date of the termination of employment
or service.
(g) Compliance with Code. The Incentive Stock Options granted under this
---------------------
Section 7 are intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Code, but the Holding Company makes no warranty as
to the qualification of any Option as an incentive stock option within the
meaning of Section 422 of the Code. All Options that do not so qualify shall be
treated as Non-statutory Stock Options.
8. LIMITED RIGHT.
-------------
Simultaneously with the grant of any Option the Committee may grant a
Limited Right with respect to all or some of the shares covered by such Option.
Limited Rights granted under this Plan are subject to the following terms and
conditions:
(a) Terms of Rights. In no event shall a Limited Right be exercisable in
---------------
whole or in part before the expiration of six months from the Date of Grant of
the Limited Right. A Limited Right may be exercised only in the event of a
Change in Control.
The Limited Right may be exercised only when the underlying Option
is eligible to be exercised, and only when the Fair Market Value of the
underlying shares on the day of exercise is greater than the Exercise Price of
the underlying Option.
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<PAGE> 40
Upon exercise of a Limited Right, the underlying Option shall cease
to be exercisable and shall be cancelled. Upon exercise or termination of an
Option, any related Limited Rights shall terminate. The Limited Rights may be
for no more than 100% of the difference between the purchase price and the Fair
Market Value of the Common Stock subject to the underlying option. The Limited
Right is transferable only when the underlying option is transferable and under
the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder shall promptly
-------
receive from the Holding Company an amount of cash equal to the difference
between the Exercise Price of the underlying option and the Fair Market Value of
the Common Stock subject to the underlying Option on the date the Limited Right
is exercised, multiplied by the number of shares with respect to which such
Limited Right is being exercised. Payments may be made less any applicable tax
withholding as set forth in Section 16 hereof.
9. STOCK AWARD.
-----------
The Committee or the Board of Directors (or in the case of an Outside
Director Participant, the Board of Directors must take the action) may, subject
to the limitations of the Plan and the availability of shares reserved but
unawarded in the Plan, from time to time, make an Award of some number of shares
of Common Stock to Employees and Outside Directors ("Stock Awards"). The Stock
Awards shall be made subject to the following terms and conditions:
(a) Payment of the Stock Award. The Stock Award may only be made in whole
--------------------------
shares of Common Stock.
(b) Terms of the Stock Awards. The Committee shall determine the dates on
-------------------------
which Stock Awards granted to a Participant shall vest and any specific
conditions or performance goals which must be satisfied prior to the vesting of
any installment or portion of the Stock Award. Notwithstanding other paragraphs
in this Section 9, the Committee may, in its sole discretion, accelerate the
vesting of any Stock Award. The acceleration of any Stock Award under the
authority of this paragraph shall create no right, expectation or reliance on
the part of any other Participant or that certain Participant regarding any
other unaccelerated Stock Awards.
(c) Stock Award Agreement. The terms and conditions of any Stock Award
----------------------
shall be evidenced by an agreement (the "Stock Award Agreement") which such
Stock Award Agreement will be subject to the terms and conditions of the Plan.
Each Stock Award Agreement shall set forth:
(i) the period over which the Stock Award will vest;
(ii) the performance goals, if any, which must be satisfied prior
to the vesting of any installment or portion of the Stock
Award. The performance goals may be set by the Committee on an
individual level, for all Participants, for all
A-10
<PAGE> 41
Awards made during a given period of time, or for all Awards
for indefinite periods;
(d) Certification of Attainment of the Performance Goal. No Stock Award or
---------------------------------------------------
portion thereof that is subject to a performance goal is to be distributed to
the Participant until the Committee certifies that the underlying performance
goal has been achieved. Once the Committee certifies that the underlying
performance goal was achieved, the Stock Award may be distributed when directed
by the Committee.
(e) Termination of Employment or Service. Unless otherwise determined by
------------------------------------
the Committee and except as provided in Section 9(f) hereof, upon the
termination of a Participant's employment or service for any reason other than
Disability, death or Termination for Cause, the Participant's unvested Stock
Awards as of the date of termination shall be forfeited and any rights the
Participant had to such unvested Stock Awards shall become null and void.
Notwithstanding any provisions set forth herein, in the event of termination of
the Participant's service due to Disability or death, all unvested Stock Awards
held by such Participant shall immediately vest and, in the event of the
Participant's Termination for Cause, the Participant's unvested Stock Awards as
of the date of such termination shall be forfeited and any rights the
Participant had to such unvested Stock Awards shall become null and void.
(f) Change in Control and Retirement. Unless otherwise determined by the
--------------------------------
Committee, in the event of the termination of the Participant's employment or
service as a result of the Participant's Retirement or following a Change in
Control, all Stock Awards held by the Participant, whether or not vested at such
time, shall become vested to the Participant or his legal representatives or
beneficiaries upon the date of the termination of employment or service.
(g) Accrual of Dividends. Whenever shares of Common Stock underlying a
---------------------
Stock Award are distributed to a Participant or beneficiary thereof under the
Plan, such Participant or beneficiary shall also be entitled to receive, with
respect to each such share distributed, a payment equal to any cash dividends
and the number of shares of Common Stock equal to any stock dividends, declared
and paid with respect to a share of the Common Stock if the record date for
determining shareholders entitled to receive such dividends falls between the
date the relevant Stock Award was granted and the date the relevant Stock Award
or installment thereof is distributed to the Participant. There shall also be
distributed an appropriate proportionate amount of net earnings, if any, of the
Trust with respect to any dividends paid out.
(h) Voting of Stock Awards. After a Stock Award has been granted but for
-----------------------
which the shares covered by such Stock Award have not yet been earned and
distributed to the Participant pursuant to the Plan, the Participant shall be
entitled to direct the Trustee as to the voting of such shares of Common Stock
which the Stock Award covers subject to the rules and procedures adopted by the
Committee for this purpose. All shares of Common Stock held by the Trust as to
which Participants are not entitled to direct, or have not directed, the voting,
shall be voted by the Trustee
A-11
<PAGE> 42
in the same proportion as the Common Stock covered by Stock Awards which have
been awarded is voted.
10. PAYOUT ALTERNATIVES
-------------------
Payments due to a Participant upon the exercise or redemption of an Award,
may be made subject to the following terms and conditions:
(a) Discretion of the Committee. The Committee has the sole discretion to
---------------------------
determine what form of payment (whether monetary, Common Stock, a combination of
payout alternatives or otherwise) it shall use in making distributions of
payments for all Awards. If the Committee requests any or all Participants to
make an election as to form of distribution or payment, it shall not be
considered bound by the election.
(b) Payment in the form of Common Stock. Any shares of Common Stock
-------------------------------------
tendered in satisfaction of an obligation arising under this Plan shall be
valued at the Fair Market Value of the Common Stock as of the date of the
issuance of such stock to the Participant.
(c) Distribution of Payment. Any payment made to a Participant in
-------------------------
satisfaction of an obligation arising under this Plan shall be distributed as
promptly as practicable after the date any conditions precedent to the payment
of the obligation have been satisfied.
11. ALTERNATE OPTION PAYMENT MECHANISM
----------------------------------
The Committee has sole discretion to determine what form of payment it
will accept for the exercise of an Option. The Committee may indicate acceptable
forms in the ISO or NSO Agreement covering such Options or may reserve its
decision to the time of exercise. No Option is to be considered exercised until
payment in full is accepted by the Committee or its agent.
(a) Cash Payment. The exercise price may be paid in cash, or by
------------
certified check.
(b) Borrowed Funds. To the extent permitted by law, the Committee may
---------------
permit all or a portion of the exercise price of an Option to be paid by means
of borrowed funds.
(c) Exchange of Common Stock.
------------------------
(i) The Committee may permit payment by the tendering of
previously acquired shares of Common Stock. This includes the
use of "pyramiding transactions" whereby some number of
Options are exercised; then the shares gained through the
exercise are tendered back to the Holding Company as payment
for the exercise of additional Options. This transaction may
be repeated as needed to exercise all of the Options
available.
A-12
<PAGE> 43
(ii) Any shares of Common Stock tendered in payment of the exercise
price of an Option shall be valued at the Fair Market Value of
the Common Stock as of the date of exercise.
12. RIGHTS OF A SHAREHOLDER AND NONTRANSFERABILITY.
----------------------------------------------
Shareholder Rights. No Participant shall have any rights as a shareholder
-------------------
with respect to any shares of Common Stock covered by an Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employ or
service of the Holding Company or its Affiliates or interferes in any way with
the right of the Holding Company or its Affiliates to terminate a Participant's
employment or service at any time.
Non-Transferability. Except to the extent permitted or restricted by the
-------------------
Code, the rules promulgated under Section 16(b) of the Exchange Act or any
successor statutes or rules, no Award under the Plan shall be transferrable by
the Participant other than by will or the laws of intestate succession or
pursuant to a domestic relations order or unless otherwise determined by the
Committee.
13. AGREEMENT WITH GRANTEES.
-----------------------
Each Award will be evidenced by a written agreement(s) (whether
constituting an NSO Agreement, ISO Agreement, Stock Award Agreement or any
combination thereof), executed by the Participant and the Holding Company or its
Affiliates that describes the conditions for receiving the Awards including the
date of Award, the Exercise Price if any, the terms or other applicable periods,
and other terms and conditions as may be required or imposed by the Plan, the
Committee, the Board of Directors, tax law considerations or applicable
securities law considerations.
14. DESIGNATION OF BENEFICIARY.
--------------------------
A Participant may, with the consent of the Committee, designate a person
or persons to receive, in the event of death, any Award to which the Participant
would then be entitled. Such designation will be made upon forms supplied by and
delivered to the Holding Company and may be revoked in writing. If a Participant
fails effectively to designate a beneficiary, then the Participant's estate will
be deemed to be the beneficiary.
15. DILUTION AND OTHER ADJUSTMENTS.
------------------------------
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Holding Company, the Committee will make
A-13
<PAGE> 44
such adjustments to previously granted Awards, to prevent dilution or
enlargement of the rights of the Participant, including any or all of the
following:
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities underlying Awards already made under the Plan; and
(c) adjustments in the purchase price of outstanding Incentive and/or
Non-statutory Stock Options, or any Limited Rights attached to such Options.
No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.
16. TAX WITHHOLDING.
---------------
Awards under this Plan shall be subject to tax withholding to the extent
required by any governmental authority. Any withholding shall comply with Rule
16b-3 under the Exchange Act, if applicable, or any amendment or successor rule.
Any shares of Common Stock withheld to pay for tax withholding amounts shall be
valued at their Fair Market Value on the date the Award is deemed taxable to the
Participant. The portions of the Award consisting of shares underlying the Stock
or Option Awards withheld to pay for tax shall be deemed terminated.
17. AMENDMENT OF THE PLAN.
---------------------
The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, prospectively or retroactively; provided however,
that provisions governing grants of Incentive Stock Options, unless permitted by
the rules and regulations or staff pronouncements promulgated under the Code
shall be submitted for shareholder approval to the extent required by such law,
regulation or interpretation.
Failure to ratify or approve amendments or modifications by shareholders
shall be effective only to the extent a specific amendment or modification
requires such ratification, or as otherwise determined by the Board of
Directors. Other provisions, sections, and subsections of this Plan will remain
in full force and effect.
No such termination, modification or amendment may adversely affect the
rights of a Participant under an outstanding Award without the written
permission of such Participant.
A-14
<PAGE> 45
18. EFFECTIVE DATE OF PLAN.
----------------------
The Plan became effective on January 11, 1996. All amendments are
effective upon approval by the Board of Directors.
19. TERMINATION OF THE PLAN.
-----------------------
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) ten (10) years after the Effective Date; or (ii) the issuance of a
number of shares of Common Stock or Common Stock equivalent amounts pursuant to
the exercise of Options or the distribution of Stock Awards which together with
the exercise of Limited Rights is equivalent to the maximum number of shares
reserved under the Plan as set forth in Section 4. The Board of Directors has
the right to suspend or terminate the Plan at any time, provided that no such
action will, without the consent of a Participant, adversely affect a
Participant's vested rights under a previously granted Award.
20. APPLICABLE LAW.
--------------
The Plan will be administered in accordance with the laws of the State of
Delaware and applicable federal law.
21. SUCCESSORS AND ASSIGNS
----------------------
All awards under this Plan shall be binding upon any successors or assigns
of the Holding Company.
22. DELEGATION OF AUTHORITY
-----------------------
The Committee may delegate all authority for: the determination of forms
of payment to be made by or received by the Plan; the execution of Award
agreements; the determination of Fair Market Value; the determination of all
other aspects of administration of the plan to the executive officer(s) of the
Holding Company or the Association. The Committee may rely on the descriptions,
representations, reports and estimate provided to it by the management of the
Holding Company or the Association for determinations to be made pursuant to the
Plan, including the attainment of performance goals. However, only the Committee
or a portion of the Committee may certify to the attainment of a performance
goal.
A-15
<PAGE> 46
IN WITNESS WHEREOF, the Holding Company has established this Plan, as
amended and restated, to be executed by its duly authorized executive officer
and the corporate seal to be affixed and duly attested, effective as of the 22nd
day of May, 1997.
[CORPORATE SEAL] HF BANCORP, INC.
Date: May 22, 1997 By: /s/ J. Robert Eichinger
--------------------------- --------------------------
Chairman of the Board
ADOPTED BY THE BOARD OF DIRECTORS:
Date: May 22, 1997 By: /s/ Janet E. Riley
--------------------------- ------------------------
Secretary
A-16
<PAGE> 47
[FRONT SIDE]
REVOCABLE PROXY
HF BANCORP, INC.
ANNUAL MEETING OF SHAREHOLDERS
October 28, 1997
2:00 p.m. Pacific Time
-------------------------------
The undersigned hereby appoints the Board of Directors of HF Bancorp, Inc.
(the "Company") to act as proxy for the undersigned, and to vote all shares of
Common Stock of the Company which the undersigned is entitled to vote only at
the Annual Meeting of Shareholders, to be held on October 28, 1997, at 2:00 p.m.
Pacific Time, at the Simpson Neighborhood Center, 305 E. Devonshire Avenue,
Hemet, California, and at any and all adjournments thereof, as follows:
1. The election as directors of all nominees listed (except as marked to
the contrary below).
J. Robert Eichinger, Harold L. Fuller and Richard S. Cupp
FOR VOTE WITHHELD
--- -------------
|_| |_|
INSTRUCTION: To withhold your vote for any individual nominee,
write that nominee's name on the line provided below:
--------------------------------------------------------------------
2. The ratification of the Amended and Restated HF Bancorp, Inc.
Stock-Based Incentive Plan and the approval of an amendment to the
Plan to increase the aggregate number of shares of common stock
authorized for issuance under such plan by 150,000.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
3. The ratification of the appointment of Deloitte & Touche LLP as
independent auditors of HF Bancorp, Inc. for the fiscal year ending
June 30, 1998.
FOR AGAINST ABSTAIN
--- ------- -------
|_| |_| |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE PROPOSALS PRESENTED.
<PAGE> 48
[BACK SIDE]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF HF BANCORP, INC.
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSALS
LISTED. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, INCLUDING
WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY THE BOARD OF
DIRECTORS IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company prior to the
execution of this Proxy of a Notice of Annual Meeting of Shareholders and of a
Proxy Statement dated September 25, 1997 and of the Annual Report to
Shareholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dated:
---------------------------- -----------------------------
SIGNATURE OF SHAREHOLDER
-----------------------------
SIGNATURE OF SHAREHOLDER
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
