[HOME FINANCIAL BANCORP LOGO]
279 East Morgan Street
Spencer, Indiana 47460
(812) 829-2095
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
----------------------------------------
To Be Held On January 8, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Home
Financial Bancorp (the "Holding Company") will be held at the Canyon Inn, Oak
Room, McCormicks Creek State Park, State Highway 46 (two miles east of Spencer),
Spencer, Indiana, on Wednesday, January 8, 1997, at 3:00 p.m., Eastern Standard
Time.
The Annual Meeting will be held for the following purposes:
1. Election of Directors. Election of all seven of the directors of the
Holding Company to serve staggered terms with terms expiring in 1997,
1998, and 1999.
2. Approval of Stock Option Plan. Approval and ratification of the Home
Financial Bancorp Stock Option Plan (the "Option Plan").
3. Approval of Recognition and Retention Plan and Trust. Approval and
ratification of the Owen Community Bank, s.b. Recognition and
Retention Plan and Trust (the "RRP").
4. Ratification of Auditors. Approval and ratification of the appointment
of Geo. S. Olive & Co., LLC as auditors for Home Financial Bancorp for
the fiscal year ending June 30, 1997.
5. Other Business. Such other matters as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on November 8, 1996, are
entitled to vote at the meeting or any adjournment thereof.
We urge you to read the enclosed Proxy Statement carefully so that you may
be informed about the business to come before the meeting, or any adjournment
thereof. At your earliest convenience, please sign and return the accompanying
proxy in the postage-paid envelope furnished for that purpose.
A copy of our Annual Report for the fiscal year ended June 30, 1996, is
enclosed. The Annual Report is not a part of the proxy soliciting material
enclosed with this letter.
By Order of the Board of Directors
/s/ Kurt J. Meier
Kurt J. Meier, President
Spencer, Indiana
November 22, 1996
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT
YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN, DATE AND
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
HOME FINANCIAL BANCORP
279 East Morgan Street
Spencer, Indiana 47460
(812) 829-2095
---------------
PROXY STATEMENT
---------------
FOR
ANNUAL MEETING OF SHAREHOLDERS
January 8, 1997
This Proxy Statement is being furnished to the holders of common stock,
without par value (the "Common Stock"), of Home Financial Bancorp (the "Holding
Company"), an Indiana corporation, in connection with the solicitation of
proxies by the Board of Directors of the Holding Company to be voted at the
Annual Meeting of Shareholders to be held at 3:00 p.m., Eastern Standard Time,
on January, 8, 1997, at the Canyon Inn, Oak Room, McCormicks Creek State Park,
State Highway 46, Spencer, Indiana, and at any adjournment of such meeting. The
principal asset of the Holding Company consists of 100% of the issued and
outstanding shares of common stock, $.01 par value per share, of Owen Community
Bank, s.b. (the "Bank"). This Proxy Statement is expected to be mailed to the
shareholders on or about November 22, 1996.
The proxy solicited hereby, if properly signed and returned to the Holding
Company and not revoked prior to its use, will be voted in accordance with the
instructions contained therein. If no contrary instructions are given, each
proxy received will be voted for each of the matters described below and, upon
the transaction of such other business as may properly come before the meeting,
in accordance with the best judgment of the persons appointed as proxies.
Any shareholder giving a proxy has the power to revoke it at any time
before it is exercised by (i) filing with the Secretary of the Holding Company
written notice thereof (Charles W. Chambers, 279 East Morgan Street, Spencer,
Indiana 47460), (ii) submitting a duly executed proxy bearing a later date, or
(iii) by appearing at the Annual Meeting and giving the Secretary notice of his
or her intention to vote in person. Proxies solicited hereby may be exercised
only at the Annual Meeting and any adjournment thereof and will not be used for
any other meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only shareholders of record at the close of business on November 8, 1996
("Voting Record Date"), will be entitled to vote at the Annual Meeting. On the
Voting Record Date, there were 505,926 shares of the Common Stock issued and
outstanding, and the Holding Company had no other class of equity securities
outstanding. Each share of Common Stock is entitled to one vote at the Annual
Meeting on all matters properly presented at the Annual Meeting. The holders of
over 50% of the outstanding shares of Common Stock as of the Voting Record Date
must be present in person or by proxy at the Annual Meeting to constitute a
quorum. In determining whether a quorum is present, shareholders who abstain,
cast broker non-votes, or withhold authority to vote on one or more director
nominees will be deemed present at the Annual Meeting.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of November 8, 1996, by each person who is
known by the Holding Company to own beneficially 5% or more of the Common Stock.
Unless otherwise indicated, the named beneficial owner has sole voting and
dispositive power with respect to the shares.
<TABLE>
<CAPTION>
Number of Shares of
Name and Address of Common Stock Percent of
Beneficial Owner (1) Beneficially Owned Class (3)
-------------------- ------------------ ---------
<S> <C> <C>
Chiplease, Inc. 50,592 (1)(2) 9.99%
c/o Goldsher & Goldsher
640 N. LaSalle Street
Suite 300
Chicago, Illinois 60610
William Lannan 32,000 6.33%
R.R. 4, Box 12
Loogootee, Indiana 47533
Frank R. Stewart 32,500 (1) 6.42%
c/o Owen Community Bank, s.b.
279 East Morgan Street
Spencer, Indiana 47460
Community Trust & Investment 40,474 (4) 8.0%
Company, Inc., Trustee
105 N. Pete Ellis Drive
Suite B
P.O. Box 5996
Bloomington, Indiana 47407
</TABLE>
(1) The information in this chart is based on Schedule 13D Report(s) filed
by the above-listed person(s) with the Securities and Exchange
Commission (the "SEC") containing information concerning shares held
by them. It does not reflect any changes in those shareholdings which
may have occurred since the date of such filings.
(2) Includes 25,592 shares held by Chiplease, Inc. and 25,000 held by its
secretary, Leon Greenblatt.
(3) Based upon 505,926 shares of Common Stock outstanding which does not
include options for 37,947 shares of Common Stock to be granted to
certain directors, officers and employees of the Holding Company and
the Bank, subject to the approval of the Option Plan by the
shareholders at the Annual Meeting.
(4) These shares are held by the Trustee of the Owen Community Bank, s.b.
Employee Stock Ownership Plan and Trust. The Employees participating
in that Plan are entitled to instruct the Trustee how to vote shares
held in their accounts under the Plan. Unallocated shares held in a
suspense account under the Plan are required under the Plan terms to
be voted by the Trustee in the same proportion as allocated shares are
voted.
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors consists of seven members. The By-Laws provide that
the Board of Directors is to be divided into three classes as nearly equal in
number as possible. The members of each class are to be elected for a term of
three years and until their successors are elected and qualified. One class of
directors is to be elected annually. Since this is the first Annual Meeting of
Shareholders following the organization of the Holding Company, it is necessary
to elect all of the directors for the terms set forth below.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted for the election of the nominees listed below. If any
person named as a nominee should be unable or unwilling to stand for election at
the time of the Annual Meeting, the proxy holders will nominate and vote for a
replacement nominee recommended by the Board of Directors. At this time, the
Board of Directors knows of no reason why the nominees listed below may not be
able to serve as directors if elected.
The following table sets forth certain information regarding the nominees
for the position of director of the Holding Company, including the number and
percent of shares of Common Stock beneficially owned by such persons as of the
Voting Record Date. Unless otherwise indicated, each nominee has sole investment
and/or voting power with respect to the shares shown as beneficially owned by
him. Mr. Parrish is married to Mr. Wilson's sister. No other nominee for
director is related to any other nominee for director or executive officer of
the Holding Company by blood, marriage, or adoption, and there are no
arrangements or understandings between any nominee and any other person pursuant
to which such nominee was selected. The table also sets forth the number of
shares of Holding Company Common Stock beneficially owned by all directors and
executive officers of the Holding Company as a group.
<PAGE>
<TABLE>
<CAPTION>
Director Common Stock
of the Beneficially
Expiration of Director of Holding Owned as of
Term as the Bank Company November 8, Percentage
Name Director Since Since 1996 (1) of Class
- ---- -------- ----- ----- -------- --------
<S> <C> <C> <C> <C> <C>
Charles W. Chambers 1998 1978 1996 500(2) 0.10%
John T. Gillaspy 1997 1986 1996 13,000(3) 2.57%
Kurt J. Meier 1999 1991 1996 1,000(4) 0.20%
Stephen Parrish 1998 1982 1996 4,000(5) 0.79%
Robert W. Raper 1997 1970 1996 5,000(6) 0.99%
Frank R. Stewart 1999 1963 1996 32,500(7) 6.42%
Tad Wilson 1999 1978 1996 12,500(8) 2.47%
All directors and executive 69,350 13.71%
officers as a group (8 persons)
</TABLE>
(1) Based upon information furnished by the respective director nominees. Under
applicable regulations, shares are deemed to be beneficially owned by a
person if he or she directly or indirectly has or shares the power to vote
or dispose of the shares, whether or not he or she has any economic power
with respect to the shares. Includes shares benefically owned by members of
the immediate families of the director nominees residing in their homes.
(2) Owned jointly by Mr. Chambers and his wife.
(3) Owned jointly by Mr. Gillaspy and his wife.
(4) Owned jointly by Mr. Meier and his wife.
(5) Owned jointly by Mr. Parrish and his wife.
(6) Owned jointly by Mr. Raper and his wife.
(7) Owned jointly by Mr. Stewart and his wife.
(8) Of these shares, 11,000 are owned jointly by Mr. Wilson and his wife and
1,500 are owned solely by his wife in an individual retirement account.
<PAGE>
Presented below is certain information concerning the director nominees of
the Holding Company:
Charles W. Chambers (age 80), has served as a director of the Holding
Company since its formation and of the Bank since 1978. Mr. Chambers has also
served as a staff appraiser for the Bank since 1991 and as Secretary of the Bank
since 1990.
John T. Gillaspy (age 68), has served as a director of the Holding
Company since its formation and of the Bank since 1986. Mr. Gillaspy has also
served as President until 1994 and Chief Executive Officer since 1994 of the
Spencer Evening World, Inc., a newspaper based in Spencer, Indiana.
Kurt J. Meier (age 46), has served as a director of the Holding Company
since its formation and of the Bank since 1991. Mr. Meier has also served as
President of the Bank since 1994. From 1990 to 1994, Mr. Meier served as
Managing Officer of the Bank.
Steven Parrish (age 56), has served as a director of the Holding
Company since its formation and of the Bank since 1982. Mr. Parrish has also
served as a funeral director for the West-Parrish-Pedigo Funeral Home in
Spencer, Indiana, for more than five years.
Robert W. Raper (age 79), has served as a director of the Holding
Company since its formation and of the Bank since 1970, with which he has served
as Vice Chairman since 1994. Prior to 1994, Mr. Raper served as Vice President
of the Bank.
Frank R. Stewart (age 71), has served as Chairman of the Board of the
Holding Company since its formation and of the Bank since 1963. Mr. Stewart
served as President of the Bank from 1982 until 1994. Mr. Stewart has also
served as President of BSF, Inc., a subsidiary of the Bank, since its formation
in 1989. Mr. Stewart has extensive experience in real estate development and
sales.
Tad Wilson (age 61), has served as a director of the Holding Company
since its formation and of the Bank since 1978. Mr. Wilson is also the co-owner
of Metropolitan Printing Services, Inc., a printing company based in
Bloomington, Indiana, and is the owner of various rental properties located in
Bloomington, Indiana.
<PAGE>
THE DIRECTORS SHALL BE ELECTED UPON RECEIPT OF A PLURALITY OF VOTES CAST AT
THE ANNUAL SHAREHOLDERS MEETING. PLURALITY MEANS THAT INDIVIDUALS WHO RECEIVE
THE LARGEST NUMBER OF VOTES CAST ARE ELECTED UP TO THE MAXIMUM NUMBER OF
DIRECTORS TO BE CHOSEN AT THE MEETING. ABSTENTIONS, BROKER NON-VOTES, AND
INSTRUCTIONS ON THE ACCOMPANYING PROXY TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR
MORE OF THE NOMINEES WILL RESULT IN THE RESPECTIVE NOMINEE RECEIVING FEWER
VOTES. HOWEVER, THE NUMBER OF VOTES OTHERWISE RECEIVED BY THE NOMINEE WILL NOT
BE REDUCED BY SUCH ACTION.
The Board of Directors and its Committees
During the fiscal year ended June 30, 1996, the Board of Directors of the
Holding Company acted by written consent three times. No director attended fewer
than 75% of the aggregate total number of meetings during the last fiscal year
of the Board of Directors of the Holding Company held while he served as
director and of meetings of committees which he served during that fiscal year.
The Board of Directors of the Holding Company has a Stock Compensation Committee
and Nominating Committee, among its other Board Committees. All committee
members are appointed by the Board of Directors.
The Stock Compensation Committee administers the Option Plan and the RRP
which are being submitted to a vote of the shareholders at the Annual Meeting.
The members of that Committee are Messrs. Gillaspy, Parrish and Wilson. It did
not meet during fiscal 1996 because the plans were not adopted until November 7,
1996.
The Holding Company's Nominating Committee, consisting of Messrs. Gillaspy,
Parrish and Wilson, nominated the slate of directors set forth in the Proxy
Statement. Although the Board of Directors of the Holding Company will consider
nominees recommended by shareholders, it has not actively solicited
recommendations for nominees from shareholders nor has it established procedures
for this purpose. Article III, Section 12 of the Holding Company's By-Laws
provides that shareholders entitled to vote for the election of directors may
name nominees for election to the Board of Directors but there are certain
requirements that must be satisfied in order to do so. Among other things,
written notice of a proposed nomination must be received by the Secretary of the
Holding Company not less than 60 days prior to the Annual Meeting; provided,
however, that in the event that less than 70 days' notice or public disclosure
of the date of the meeting is given or made to shareholders (which notice or
public disclosure includes the date of the Annual Meeting specified in the
Holding Company's By-Laws if the Annual Meeting is held on such date), notice
must be received not later than the close of business on the 10th day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made.
Management Remuneration and Related Transactions
Remuneration of Named Executive Officer
During the fiscal year ended June 30, 1996, no cash compensation was paid
directly by the Holding Company to any of its executive officers. Each of such
officers was compensated by the Bank.
The following table sets forth information as to annual, long-term and
other compensation for services in all capacities to the Holding Company and its
subsidiaries for the fiscal year ended June 30, 1996, of the person who served
as chief executive officer of the Holding Company during the fiscal year ended
June 30, 1996 (the "Named Executive Officer"). There were no other executive
officers of the Holding Company who earned over $100,000 in salary and bonuses
during that fiscal year.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
----------------------
Annual Compensation Awards
-------------------------------------- -----------------------
Name Other All
and Annual Restricted Securities Other
Principal Fiscal Compen- Stock Underlying Compen-
Position Year Salary ($) Bonus ($) sation($)(2) Awards($) Options(#) sation($)(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kurt J. Meier 1996 $51,520 (1) $ --- --- --- --- $1,399
President, Chief Executive 1995 $49,440 (1) $5,600 --- --- --- $1,357
Officer and Treasurer
</TABLE>
(1) Includes fees received for service on the Bank's Board of Directors and
amounts deferred by the Named Executive Officer pursuant to 401(k) of the
Internal Revenue Code of 1986, as amended (the "Code") under the Bank's
Thrift Plan.
(2) Mr. Meier received certain perquisites, but the incremental cost of
providing such perquisites did not exceed the lesser of $50,000 or 10% of
his salary and bonus.
(3) Consists of the Bank's contribution on behalf of the Named Executive
Officer to the Thrift Plan.
Stock Options
No stock options were granted during fiscal 1996 or held as of June 30,
1996, by the Named Executive Officer. For information concerning grants of stock
options made in fiscal 1997, including a grant of a stock option for 5,059
shares of the Common Stock to the Named Executive Officer, see "Proposal
II--Stock Option Plan."
Employment Contracts
The Bank has entered into three-year employment contracts with each of
Messrs. Meier and Rosenberger (together, the "Employees"). The contracts with
the Employees, effective as of July 1, 1996, extend annually for an additional
one-year term to maintain their three-year term if the Board of Directors of the
Bank determines to so extend them, unless notice not to extend is properly given
by either party to the contract. Each Employee receives an initial salary under
the contract equal to his current salary subject to increases approved by the
Board of Directors. The contracts also provide, among other things, for
participation in other fringe benefits and benefit plans available to the Bank's
employees. Each Employee may terminate his employment upon sixty days' written
notice to the Bank. The Bank may discharge each Employee for cause (as defined
in the contract) at any time or in certain specified events. If the Bank
terminates an Employee's employment for other than cause or if the Employee
terminates his own employment for cause (as defined in the contract), the
Employee will receive his base compensation under the contract for an additional
three years if the termination follows a change of control in the Holding
Company (as defined below) or for the remaining term of the Agreement, if the
termination does not follow a change of control. In addition, during such
period, the Employee will continue to participate in the Bank's group insurance
plans or receive comparable benefits. Moreover, within a period of three months
after such termination following a change of control, each Employee will have
the right to cause the Bank to purchase any stock options he holds for a price
equal to the fair market value (as defined in the contact) of the shares subject
to such options minus their option price. If the payments provided for in the
contract, together with any other payments made to the Employees by the Bank,
are deemed to be payments in violation of the "golden parachute" rules of the
Code, such payments will be reduced to the largest amount which would not cause
the Bank to lose a tax deduction for such payments under those rules. As of the
date hereof, the cash compensation which would be paid under the contracts to
the Employees if the contracts were terminated either after a change of control
of the Holding Company, without cause by the Bank, or for cause by the
Employees, would be $141,960 for Mr. Meier and $130,260 for Mr. Rosenberger. For
purposes of these employment contracts, a change of control of the Holding
Company is generally an acquisition of control, as defined in regulations issued
under the Change in Bank Control Act and the Bank Holding Company Act of 1956,
as amended.
The employment contracts provide the Bank protection of its confidential
business information and protection from competition by each of the Employees
should he voluntarily terminate his employment without cause or be terminated by
the Bank for cause.
<PAGE>
The Bank also entered into a three-year employment contract with Mr.
Stewart effective as of January 1, 1996. Mr. Stewart's employment agreement
provides for the payment by the Bank to Mr. Stewart of an annual salary equal to
$44,980, subject to increases as determined by the Board of Directors. In the
event Mr. Stewart's employment is terminated by the Bank without cause, Mr.
Stewart will continue to receive such compensation during the then-remaining
term of the contract.
The Bank is the owner and beneficiary of $100,000 in key man life
insurance on the lives of Mr. Meier and Mr. Rosenberger.
Compensation of Directors
All directors of the Bank are entitled to receive monthly director fees
for their services. Each of Mr. Gillaspy and Mr. Raper receive $650 per month,
and Mr. Stewart receives $450 per month. All other directors of the Bank receive
$350 per month.
Directors of the Holding Company are not currently paid directors'
fees. The Holding Company may, if it believes it is necessary to attract
qualified directors or otherwise beneficial to the Holding Company, adopt a
policy of paying directors' fees.
Transactions With Certain Related Persons
The Bank has followed a policy of offering to its directors and
executive officers real estate mortgage loans secured by their principal
residence and other loans. These loans are made in the ordinary course of
business with the same collateral, interest rates and underwriting criteria as
those of comparable transactions prevailing at the time and do not involve more
than the normal risk of collectibility or present other unfavorable features.
PROPOSAL II -- STOCK OPTION PLAN
The Board of Directors of the Holding Company adopted the Home Financial
Bancorp Stock Option Plan (the "Option Plan") on November 7, 1996. The essential
features of the Option Plan are summarized below, but the Option Plan is set
forth in full in Exhibit A to this Proxy Statement, and all statements made in
this summary are qualified by reference to the full text of the Option Plan.
Purpose
The purpose of the Option Plan is to provide to certain directors, officers
and other key employees of the Holding Company and its subsidiaries (currently
approximately ten persons) a favorable opportunity to acquire Common Stock of
the Holding Company and thereby increase the incentive of such persons to work
for the success of the Holding Company and its subsidiaries and better enabling
such entities to attract or retain capable directors and executive personnel.
The Option Plan provides for the grant of both incentive stock options
(options that afford favorable tax treatment to recipients upon compliance with
certain restrictions and that do not normally result in tax deductions to the
Holding Company) and options that do not so qualify (non-qualified stock
options).
Administration
The Option Plan is administered, construed and interpreted by a committee
consisting of at least two members of the Holding Company's Board of Directors.
Currently, the Holding Company's Stock Compensation Committee (the "Stock
Compensation Committee") administers the Option Plan. The Stock Compensation
Committee selects the individuals to whom options will be granted and determines
the time of grant, the number of shares of stock to be covered by each option,
the option price, the period within which the option may be exercised, whether
the option is an incentive stock option or non-qualified stock option, and any
other terms and conditions of the options granted. Members of the Stock
Compensation Committee must be nonemployee directors of the Holding Company. The
current members of that Committee are set forth on page 4 of this Proxy
Statement.
Reservation of Shares
The Holding Company has reserved 50,592 shares of its Common Stock for
issuance upon exercise of options to be granted under the Option Plan, and stock
options for 37,947 of such shares have already been granted, subject to and
effective as of the date the Holding Company's shareholders approve the Option
<PAGE>
Plan. Shares issued under the Option Plan may be authorized but unissued shares
or treasury shares of the Holding Company. In the event of corporate changes
affecting the Holding Company's Common Stock, such as reorganizations,
recapitalizations, stock splits, stock dividends, mergers, consolidations,
liquidations, and extraordinary distributions (consisting of cash, securities,
or other assets), the Stock Compensation Committee may make appropriate
adjustments in the number and kind of shares reserved under the Option Plan and
in the option price under, and the number and kind of shares covered by,
outstanding options granted under the Option Plan. Any shares subject to an
option which expires or is terminated before exercise will again be available
for issuance under the Option Plan.
Options may be granted to officers (including officers who are members of
the Board of Directors) and other key employees of the Holding Company and its
subsidiaries who are materially responsible for the management or operation of
the business of the Holding Company or its subsidiaries and have provided
valuable services to the Holding Company or its subsidiaries. Such individuals
may be granted more than one option under the Option Plan.
Since its adoption by the Board of Directors, the following incentive stock
options have been granted under the Option Plan. All such options were granted
effective as of the date the Holding Company's shareholders approve the Option
Plan, have an option price per share equal to the average between the high and
low sales prices for a share of the Holding Company's Common Stock ("Market
Value") on that date, and have ten-year terms. These options become exercisable
at the rate of 20% per year beginning on the anniversary of the date of grant,
subject to earlier vesting in the event of the death or disability of the option
holder. Such grants of incentive stock options are as follows:
Shares Subject
Optionee To Options
-------- ----------
Kurt J. Meier 5,059
All other executive officers as a group
(2 persons) 8,853
All other employees as a group (12 persons) 11,385
------
Total 25,297
======
In addition, pursuant to the terms of the Option Plan, non-qualified stock
options were granted to the five directors of the Holding Company who are not
employees of the Holding Company or its subsidiaries ("Outside Directors").
These options for such Outside Directors were granted effective as of the date
the Holding Company's shareholders approve the Option Plan, and are each
non-qualified stock options to purchase 2,530 shares of the Holding Company
Common Stock at the Market Value of such shares on such date. The terms of these
options end ten years and one day following the date of grant, and became
exercisable at the rate of 20% per year beginning on the anniversary of the date
of the grant, subject to earlier vesting in the event of the death or disability
of the option holder. Each person who is elected as an Outside Director in the
future may be granted on the date he becomes a director a non-qualified stock
option to acquire 2,530 shares of Holding Company Common Stock (as adjusted
pursuant to the Plan's antidilution provisions) at an option price per share
equal to the Market Value of a share of Common Stock on the date he becomes an
Outside Director. Such options shall have terms of 10 years and one day, and
will become exercisable at the rate of 20% per year beginning on the anniversary
of the date of grant, subject to earlier vesting in the event of the death or
disability of the option holder. Outside Directors are not eligible to receive
any other option grants under the Option Plan. At November 14, 1996, the last
sale price for a share of the Holding Company's Common Stock was $12.50 per
share.
Terms of the Options
Stock Option Price. The price to be paid for shares of Common Stock upon
the exercise of each incentive stock option shall not be less than the fair
market value of such shares on the date on which the option is granted.
Incentive stock options granted to holders of more than 10% of the combined
voting power of all classes of stock of the Holding Company may be granted at an
option price no less than 110% of the fair market value of the stock on the date
of grant.
<PAGE>
Option Term. No option may have a term longer than ten years and one day
from the date grant. However, under the Internal Revenue Code of 1986, as
amended (the "Code"), incentive stock options may not have terms in excess of
ten years. Options issued to Outside Directors must be for terms of ten years
and one day from the date of grant. Incentive stock options granted to holders
of more than 10% of the combined voting power of all classes of stock of the
Holding Company may not have terms in excess of five years.
Exercise of Option. The option price of each share of stock is to be paid
in full in cash at the time of exercise. Under certain circumstances, the Option
Plan permits optionees to deliver a notice to their broker to deliver to the
Holding Company the total option price in cash and the amount of any taxes to be
withheld from the optionee's compensation as a result of any withholding tax
obligation of the Holding Company. Beginning on July 1, 1999, payment of the
option price may also be effected by tendering whole shares of the Holding
Company's Common Stock owned by the Optionee and cash having a fair market value
equal to the cash exercise price of the shares with respect to which the option
is being exercised. Options may be exercisable in full at any time during their
term or in such installments, on a cumulative basis, as the Stock Compensation
Committee may determine, except that no option may be exercised at any time as
to fewer than 100 shares unless the exercise is with respect to an entire
residue of fewer than 100 shares, no option may be exercised during the first
six months of its term, and options granted to Outside Directors become
exercisable at the rate of 20% per year beginning on the anniversary of the date
of grant of such options.
Exercise of Options by Other than Outside Directors. Except as provided
below, upon termination of an optionholder's employment by the Holding Company
and its subsidiaries, all rights under any options granted to him but not yet
exercised terminate. In the event that an optionee retires pursuant to any then
existing pension plan of the Holding Company or its subsidiaries, his option may
be exercised by him in whole or in part within three years after his retirement
until the expiration of the option term fixed by the Committee, to the extent
the option was otherwise exercisable by him at his date of retirement; provided,
however, that if he remains a director of the Holding Company he may exercise
such option until the later of (a) three years after his retirement or (b) six
months after he ceases to be a director of the Holding Company. If an optionee's
employment by the Holding Company and its subsidiaries terminates by reason of
permanent and total disability, his option may be exercised by him in whole or
in part within one year after such termination of employment, whether or not the
option was otherwise exercisable by him at the time of such termination of
employment. If the optionee dies while employed by the Holding Company or its
subsidiaries, within three years after his retirement (or, if later, six months
following his termination of service as a director of the Holding Company), or
within one year after his termination of employment because of permanent and
total disability, his option may be exercised by his estate or by the person or
persons entitled thereto by will or by the applicable laws of descent or
distribution at any time within one year after the date of such death, whether
or not the option was otherwise exercisable by the optionee at the date of his
death. Notwithstanding the foregoing, in no event may any option be exercised
after the expiration of the option term set by the Stock Compensation Committee.
Exercise of Options by Outside Directors. Options granted to Outside
Directors terminate six months after the date such Outside Director ceases to be
a director and director emeritus of the Holding Company for any reason. If an
optionee who is an Outside Director ceases to be a director and a director
emeritus by reason of disability, any option granted to him may be exercised in
whole or in part within one year of such termination of service, whether or not
the option was otherwise exercisable by him at the time of such termination of
service. In the event of the death of an Outside Director while serving as a
director or director emeritus of the Holding Company, within six months after he
ceases to be a director and a director emeritus of the Holding Company, or
within one year after he ceases to be a director and a director emeritus of the
Holding Company by reason of disability, any option granted to him may be
exercised by his estate or by the person or persons entitled thereto by will or
by the applicable laws of descent or distribution at any time within one year
after the date of such death, whether or not the option was exercisable by the
optionee at the date of his death. Notwithstanding the foregoing, in no event
may any option be exercised after the expiration of the option term set by the
Stock Compensation Committee.
Nontransferability of Option. Options may not be transferred except by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order. During the lifetime of an optionee, they may be exercised only
by him or his guardian or legal representative.
<PAGE>
Maximum Incentive Stock Options. The aggregate fair market value of stock
with respect to which incentive stock options are exercisable for the first time
by an optionee during any calendar year under the Option Plan may not exceed
$100,000. For purposes of these computations, the fair market value of the
shares is to be determined as of the date the option is granted and computed in
the manner determined by the Stock Compensation Committee consistent with the
requirements of the Code. This limitation does not apply to non-qualified stock
options granted under the Option Plan.
Other Provisions
The Stock Compensation Committee may provide for such other terms,
provisions and conditions of an option as are not inconsistent with the Option
Plan. The Stock Compensation Committee may also prescribe, and amend, waive and
rescind rules and regulations relating to the Option Plan, may accelerate the
vesting of stock options granted the Option Plan, may make amendments or
modifications in the terms and conditions (including exercisability) of the
options relating to the effect of termination of employment of the optionees,
and may waive any restrictions or conditions applicable to any option or the
exercise thereof.
Amendment and Termination
The Board of Directors of the Holding Company may amend the Option Plan
from time to time, and, with the consent of the optionee, the terms and
provisions of his option, provided, however, that (1) no amendment may, without
the consent of an optionee, make any changes in any outstanding option which
would adversely affect the rights of the optionee and (2) without approval of
the holders of at least a majority of the shares of the Holding Company voting
in person or by proxy at a duly constituted meeting, or adjournment thereof, the
following changes in the Option Plan may not be made: an increase in the number
of shares reserved for issuance under the Option Plan (except as permitted by
the antidilutive provisions in the Option Plan); an extension of the option
terms to more than 10 years and one day from the date of grant of the option; or
a material modification of the class of employees eligible to receive options
under the Option Plan. The Board of Directors of the Holding Company may
terminate the Option Plan at any time. In any event, no incentive stock options
may be granted under the Stock Option Plan after November 6, 2006.
Federal Income Tax Consequences
The grant of incentive and non-qualified stock options will have no federal
tax consequences to the Holding Company or the optionee. Moreover, if an
incentive stock option is exercised (a) while the employee is employed by the
Holding Company or its subsidiaries, (b) within three months after the optionee
ceases to be an employee of the Holding Company or its subsidiaries, (c) after
the optionee's death, or (d) within one year after the optionee ceases to be an
employee of the Holding Company or its subsidiaries if the optionee's employment
is terminated because of permanent and total disability (within the meaning of
ss. 22(e)(3) of the Code), the exercise of the incentive stock option will
ordinarily have no federal income tax consequences to the Holding Company or the
optionee. However, the amount by which the fair market value of the shares at
the time of exercise exceeds the option price of the option will, along with
other specified items, be considered taxable income in the taxable year of the
optionee in which the option was exercised for purposes of determining the
applicability of the alternative minimum tax. As a result, the exercise of an
incentive stock option may subject an optionee to an alternative minimum tax
depending on that optionee's particular circumstances.
On the other hand, the recipient of a non-qualified stock option generally
will realize taxable ordinary income at the time of exercise of his option in an
amount equal to the excess of the fair market value of the shares acquired at
the time of such exercise over the option price. A like amount is generally
deductible by the Holding Company for federal income tax purposes as of that
date, as long as the Holding Company withholds federal income tax with respect
to that taxable amount, assuming the optionholder's income is subject to income
tax witholding by the Holding Company. The Option Plan permits, under certain
circumstances, holders of non-qualified stock options (other than Outside
Directors) to satisfy their withholding obligation by having shares equal in
value to the applicable withholding taxes withheld from the shares which they
would otherwise receive upon the exercise of a non-qualified stock option.
Upon the sale of the shares acquired upon the exercise of an incentive
stock option no sooner than two years after the grant of the option and no
sooner than one year after receipt of the shares by the optionee, any capital
gain recognized would be taxed to the optionee at long-term rates. Upon the sale
of shares acquired upon the exercise of an incentive stock option prior to two
years after the grant of an option or prior to one year after receipt of the
shares by the optionee, the optionee will generally recognize, in the year of
disposition, ordinary income equal to the lesser of (a) the spread between the
fair market value of the shares on the date of exercise and the exercise price;
and (b) the gain realized upon the disposition of those shares. The Holding
Company will be entitled to a deduction equal to the amount of income recognized
as ordinary income by the optionee, so long as the Holding Company withholds
federal income tax with respect to that taxable amount (assuming the
optionholder's income is subject to income tax witholding by the Holding
Company). If the spread is the basis for determining the amount of ordinary
income realized by the optionee, there will be additional long-term or
short-term capital gain realized if the proceeds of such sale exceed such
spread.
Upon the subsequent sale of shares acquired upon exercise of a
non-qualified stock option, the optionholder will recognize long-term capital
gain or loss if the shares are deemed to have been held for more than one year,
and short-term capital gain or loss in all other cases. Currently, long-term
capital gains for noncorporate taxpayers are generally taxed at a maximum rate
of 28%. However, there are several proposals which have been introduced in
Congress which would modify or cause a reduction in the capital gains tax.
<PAGE>
Financial Accounting Consequences
At this time, neither the grant of incentive or non-qualified stock options
nor the issuance of shares upon exercise of such options will result in a
compensation expense charge to the Holding Company's earnings for financial
accounting purposes. Option proceeds from the exercise of these options and tax
savings from non-qualified stock options are credited to capital. The Financial
Accounting Standards Board (the "FASB") has adopted rules that require increased
disclosure about the value of stock options in financial statements for the
Holding Company, including their impact on earnings.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE AND
RATIFY THE OPTION PLAN. SUCH ACTION REQUIRES THE APPROVAL OF THE HOLDERS OF AT
LEAST A MAJORITY OF THE SHARES OF THE HOLDING COMPANY'S COMMON STOCK ENTITLED TO
VOTE AT THE ANNUAL MEETING, OR ANY ADJOURNMENT THEREOF. ABSTENTIONS AND BROKER
NON-VOTES WILL BE INCLUDED IN THE NUMBER OF SHARES PRESENT AND ENTITLED TO VOTE
ON THE PROPOSAL AND ACCORDINGLY TREATED AS "NO" VOTES.
PROPOSAL III -- RECOGNITION AND RETENTION PLAN AND TRUST
The Board of Directors of the Holding Company adopted the Recognition and
Retention Plan and Trust (the "RRP") on November 7, 1996. The central features
of the RRP are summarized below, but the RRP is set forth in full in Exhibit B
to this Proxy Statement, and all statements made in this summary are qualified
by reference to the full text of the RRP.
Purpose
The purpose of the RRP is to retain directors and key employees of the
Holding Company and its subsidiaries by providing such persons with a
proprietary interest in the Holding Company, as compensation for their
contributions to the Holding Company and its subsidiaries and as an incentive to
make such contributions in the future.
Administration
The RRP is administered by the Stock Compensation Committee (the "Stock
Compensation Committee") of the Holding Company's Board of Directors, which must
at all times consist of at least two directors of the Holding Company, each of
whom is a non-employee director within the meaning of the definition of that
term contained in Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The current members of the Stock Compensation
Committee are set forth on page 4 of this Proxy Statement. The Stock
Compensation Committee selects recipients and establishes terms of awards made
under the RRP. The Stock Compensation Committee's interpretations and
constructions of the RRP provisions or any award made under the RRP are final
and binding.
The Committee may adopt rules or regulations under the RRP. The Trustee of
the RRP is Fifth Third Bank of Central Indiana. The Trustee acquires, holds and
distributes shares of Common Stock and other RRP assets in accordance with the
terms of the RRP.
<PAGE>
The Holding Company has agreed to indemnify the Trustee, the Committee
members, and any director of the Holding Company or of the Bank against
liability for good faith determinations made under the RRP. The Holding Company
has also agreed to indemnify the Trustee for actions under the RRP not
constituting negligence or willful misconduct.
Eligibility
Employees of the Holding Company and its affiliated corporations who elect
to participate in the RRP ("Affiliates"), are eligible to receive awards under
the RRP. The Committee is to consider the position and responsibilities of the
eligible employees, the length and value of their services, their level of
compensation, and any other factors the Committee deems relevant. In addition,
certain Outside Directors of the Holding Company have been granted specific
awards under the terms of the RRP. Such Outside Directors may not receive any
further awards under the RRP.
Contributions
The Bank's Board of Directors determines the amount or method of computing
the amount of cash contributions to be made to the RRP by the Bank or its
Affiliates. No employee contributions are permitted.
Investment of Contributions
Contributions made to the RRP are to be invested by the Trustee in Common
Stock, to the fullest extent possible. At the time the Plan became effective,
20,237 shares of the Holding Company's Common Stock were reserved for purchase
under the RRP. Such shares may be authorized but unissued shares, treasury
shares, or issued and outstanding shares. In the event additional authorized but
unissued shares or treasury shares are acquired by the RRP, the interests of
existing shareholders will be diluted. Earnings, gains and losses with respect
to Trust assets (including dividends and distributions payable with respect to
shares of Common Stock) will be allocated to recipients of RRP awards, to the
extent allocable to awards made to those recipients, and, otherwise, to the
general account of the Trust. All expenses and costs of administering the RRP
are to be paid by the Holding Company or the Bank.
If the RRP is approved by shareholders, the Bank will make a contributions
to the RRP in an amount necessary to purchase 15,179 shares of the Holding
Company's Common Stock on the open market to fund the RRP. Based on the market
price of such Common Stock on November 14, 1996, the amount of such contribution
is estimated to be $189,738. Effective as of the date the RRP is approved by the
Holding Company's shareholders, shares will be awarded to the following persons
in the following amounts:
Recipient of Award Number of Shares Awarded
------------------ ------------------------
Kurt J. Meier 2,846
All other executive officers as a group (2 persons) 4,743
All other employees as a group (2 persons) 2,530
------
Total 10,119
======
These awards vest at a rate of 20% per year commencing with the date of the
award, subject to earlier vesting in the event of the death or disability of the
grantee.
In addition, each of the five Outside Directors of the Holding Company will
receive an award of 1,012 shares as of the date the Plan is approved by the
Holding Company's shareholders. These awards also vest at a rate of 20% per year
commencing with the date of the award, subject to earlier vesting in the event
of the death or disability of the grantee.
Awards
Under the RRP, awards are granted to eligible employees and directors in
the form of shares of Common Stock held by the RRP. Awards are nontransferable
and nonassignable, other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order, and during the lifetime of the
recipient may only be earned by and paid to him. Unless the Committee provides
otherwise, at the time an RRP award is granted, the shares which are the subject
of the award are to vest and be earned by the recipient at the rate of 20% of
<PAGE>
the shares awarded at the end of each full 12 months of service with the Bank or
an Affiliate after the date of grant of the award. Awards are adjusted for
capital changes such as stock dividends and stock splits. Awards are subject to
the claims of the Bank's creditors until distributed.
Notwithstanding the foregoing, awards will be 100% vested upon termination
of employment or service as a director or director emeritus due to death or
disability. In the event that a grantee terminates employment with the Holding
Company and an Affiliate and service as a director and director emeritus for any
other reason, the nonvested awards will be forfeited. If an employee's
employment or a director's or or director emeritus' service is terminated for
cause (as defined in the RRP), or if his conduct would have justified
termination for cause, shares not already delivered to him under the RRP,
whether or not vested, may be forfeited by resolution of the Board of Directors
of the Bank. Earned shares are distributed to recipients as soon as practicable
following the day on which they are earned. When shares become vested and are
actually distributed in accordance with the RRP, the participants will also
receive amounts equal to any accrued dividends and other earnings or
distributions payable with respect thereto.
Voting
Prior to vesting, shares held in the RRP will be voted by the RRP Trustee
taking into account the best interests of the award recipients.
Federal Income Tax Consequences
The Trust should be treated as a grantor trust under the Code and, thus, in
computing the taxable income and credits of the Holding Company, those items of
income, deductions and credits which are attributable to the Trust shall be
taken into account by the Holding Company. When shares become vested in
accordance with the RRP, the participants will recognize income equal to the
fair market value of the Common Stock at that time; provided however that
participants may make a ss. 83(b) election under the Code with respect to all or
part of their awards prior to vesting and in such situations restricted stock
certificates will be delivered to such participants and those participants will
be taxed on the the fair market value of the shares at the time the ss. 83(b)
election is made. The amount of income recognized by the participants will be a
deductible expense for tax purposes for the Holding Company assuming the
employer satisfies its withholding tax obligation with respect to persons
subject to such withholding.
Accounting Treatment
When the Stock Compensation Committee makes an RRP award, an amount equal
to the fair market value at the date of grant of the awarded stock is charged to
compensation expense over the period of the restriction. The unearned portion of
the award is included in the Holding Company's balance sheet as a reduction of
shareholders' equity.
Amendment or Termination
The Board of Directors of the Bank may amend or terminate the RRP. The RRP
remains in effect until the earlier of 21 years from its effective date,
termination by the Board of the Bank, or the distribution of all Trust assets.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO APPROVE THE
RRP. SUCH ACTION REQUIRES THE APPROVAL OF THE HOLDERS OF AT LEAST A MAJORITY OF
THE SHARES OF THE HOLDING COMPANY'S COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL
MEETING, OR ANY ADJOURNMENT THEREOF. ABSTENTIONS AND BROKER NON-VOTES WILL BE
INCLUDED IN THE NUMBER OF SHARES PRESENT AND ENTITLED TO VOTE ON THE PROPOSAL
AND ACCORDINGLY TREATED AS "NO" VOTES.
PROPOSAL IV -- RATIFICATION OF AUDITORS
The Board of Directors proposes for the ratification of the
shareholders at the Annual Meeting the appointment of Geo. S. Olive & Co., LLC,
certified public accountants, as independent auditors for the fiscal year ended
June 30, 1997. Geo. S. Olive & Co., LLC has served as auditors for the Bank
since 1989. A representative of Geo. S. Olive & Co., LLC will be present at the
Annual Meeting with the opportunity to make a statement if he so desires. He
will also be available to respond to any appropriate questions shareholders may
have.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires that the Holding Company's officers
and directors and persons who own more than 10% of the Holding Company's Common
Stock file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the Holding Company with
copies of all Section 16(a) forms that they file.
Based solely on its review of the copies of such forms received by it,
and/or written representations from certain reporting persons that no Forms 5
were required for those persons, the Holding Company believes that during the
fiscal year ended June 30, 1996, all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners with respect to
Section 16(a) of the 1934 Act were satisfied in a timely manner.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder wishes to have presented at the next
Annual Meeting of the Holding Company must be received at the main office of the
Holding Company for inclusion in the proxy statement no later than 120 days in
advance of November 22, 1997. Any such proposal should be sent to the attention
of the Secretary of the Holding Company at 279 East Morgan Street, Spencer,
Indiana 47460.
OTHER MATTERS
Management is not aware of any business to come before the Annual Meeting
other than those matters described in the Proxy Statement. However, if any other
matters should properly come before the Annual Meeting, it is intended that the
proxies solicited hereby will be voted with respect to those other matters in
accordance with the judgment of the persons voting the proxies.
The cost of solicitation of proxies will be borne by the Holding Company.
The Holding Company will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable expenses incurred by them in sending
proxy material to the beneficial owners of the Common Stock. In addition to
solicitation by mail, directors, officers, and employees of the Holding Company
may solicit proxies personally or by telephone without additional compensation.
Each shareholder is urged to complete, date and sign the proxy and return
it promptly in the enclosed envelope.
By Order of the Board of Directors
/s/ Kurt J. Meier
Kurt J. Meier, President
November 22, 1996
<PAGE>
EXHIBIT A
HOME FINANCIAL BANCORP
STOCK OPTION PLAN
1. Purpose. The purpose of the Home Financial Bancorp Stock Option Plan
(the "Plan") is to provide to directors, officers and other key employees of
Home Financial Bancorp (the "Holding Company") and its majority-owned and
wholly-owned subsidiaries (individually a "Subsidiary" and collectively the
"Subsidiaries"), including, but not limited to, Owen Community Bank, s.b. upon
its conversion to stock form ("Owen"), who are materially responsible for the
management or operation of the business of the Holding Company or a Subsidiary
and have provided valuable services to the Holding Company or a Subsidiary, a
favorable opportunity to acquire Common Stock, without par value ("Common
Stock"), of the Holding Company, thereby providing them with an increased
incentive to work for the success of the Holding Company and its Subsidiaries
and better enabling each such entity to attract and retain capable directors and
executive personnel.
2. Administration of the Plan. The Plan shall be administered,
construed and interpreted by a committee (the "Committee") consisting of at
least two members of the Board of Directors of the Holding Company, each of whom
is a "Non-Employee Director" within the meaning of the definition of that term
contained in Reg. ss. 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"). The members of the Committee shall be
designated from time to time by the Board of Directors of the Holding Company.
The decision of a majority of the members of the Committee shall constitute the
decision of the Committee, and the Committee may act either at a meeting at
which a majority of the members of the Committee is present or by a written
consent signed by all members of the Committee. The Committee shall have the
sole, final and conclusive authority to determine, consistent with and subject
to the provisions of the Plan:
(a) the individuals (the "Optionees") to whom options or
successive options shall be granted under the Plan;
(b) the time when options shall be granted hereunder;
(c) the number of shares of Common Stock to be covered under each
option;
(d) the option price to be paid upon the exercise of each option;
(e) the period within which each such option may be exercised;
(f) the extent to which an option is an incentive stock option or
a non-qualified stock option; and
(g) the terms and conditions of the respective agreements by which
options granted shall be evidenced.
The Committee shall also have authority to prescribe, amend, waive, and rescind
rules and regulations relating to the Plan, to accelerate the vesting of any
stock options made hereunder, to make amendments or modifications in the terms
and conditions (including exercisability) of the options relating to the effect
of termination of employment of the optionee (subject to the last sentence of
Section 9 hereof), to waive any restrictions or conditions applicable to any
option or the exercise thereof, and to make all other determinations necessary
or advisable in the administration of the Plan.
<PAGE>
3. Eligibility. The Committee may, consistent with the purposes of the
Plan, grant options to officers and other key employees of the Holding Company
or of a Subsidiary who in the opinion of the Committee are from time to time
materially responsible for the management or operation of the business of the
Holding Company or of a Subsidiary and have provided valuable services to the
Holding Company or a Subsidiary; provided, however, that in no event may any
employee who owns (after application of the ownership rules in ss. 425(d) of the
Internal Revenue Code of 1986, as amended (the "Code")) shares of stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Holding Company or any of its Subsidiaries be granted an
incentive stock option hereunder unless at the time such option is granted the
option price is at least 110% of the fair market value of the stock subject to
the option and such option by its terms is not exercisable after the expiration
of five (5) years from the date such option is granted. Directors of the Holding
Company who are not employees of the Holding Company ("Outside Directors"), who
are serving as such on the date Owen converts (the "Conversion") from mutual to
stock form (the "Conversion Date") shall each be granted on the date of the
Holding Company's first Shareholder Meeting following the Conversion (the "First
Shareholder Meeting Date"), assuming he is serving as an Outside Director on
such date, a non-qualified option to purchase the number of whole shares of
Common Stock of the Holding Company determined by multiplying the total number
of shares issued by the Holding Company on the Conversion Date by .5%, and
rounding up to the next whole share. Such options shall have an exercise price
per share equal to the fair market value of a share of such Common Stock, as
determined by the Committee, consistent withTreas. Req. ss. 20.2031-2, on the
First Shareholder Meeting Date. Each person who is elected for the first time to
be an Outside Director (other than persons who were previously employees of the
Holding Company or of any of its Subsidiaries) on or after the First Shareholder
Meeting Date shall be granted at the date he or she first becomes an Outside
Director a non-qualified stock option to acquire the number of whole shares of
Common Stock of the Holding Company determined by multiplying the total number
of shares issued by the Holding Company on the Conversion Date by .5%, and
rounding up to the next whole share (subject to adjustment pursuant to the
antidilution provisions of Section 7 hereof), at an option price per share equal
to the fair market value of a share of such Common Stock, as determined by the
Committee, consistent with Treas. Reg. ss. 20.2031-2, on the date he or she
first becomes an Outside Director, or on the next preceding trading day if such
date was not a trading date. If on any date in any given year the number of
shares of Common Stock available for awards under the Plan is insufficient to
grant each such Outside Director entitled thereto such a non-qualified stock
option, the shares available for the non-qualified stock options shall be
awarded ratably (to the nearest whole share) to each such Outside Director on
such date. Outside Directors are not entitled to receive any other awards under
this Plan. Subject to the foregoing and the provisions of Section 7 hereof, an
individual who has been granted an option under the Plan (an "Optionee"), if he
is otherwise eligible, may be granted an additional option or options if the
Committee shall so determine.
4. Stock Subject to the Plan. There shall be reserved for issuance upon
the exercise of options granted under the Plan, shares of Common Stock of the
Holding Company equal to 10% of the total number of shares of Common Stock
issued by the Holding Company upon the conversion of Owen from mutual to stock
form, which may be authorized but unissued shares or treasury shares of the
Holding Company. Subject to Section 7 hereof, the shares for which options may
be granted under the Plan shall not exceed that number. If any option shall
expire or terminate or be surrendered for any reason without having been
exercised in full, the unpurchased shares subject thereto shall (unless the Plan
shall have terminated) become available for other options under the Plan.
5. Terms of Options. Each option granted under the Plan shall be
subject to the following terms and conditions and to such other terms and
conditions not inconsistent therewith as the Committee may deem appropriate in
each case:
(a) Option Price. The price to be paid for shares of stock
upon the exercise of each option shall be determined by the Committee
at the time such option is granted, but such price in no event shall be
less than the fair market value, as determined by the Committee
consistent with Treas. Reg. ss. 20.2031-2 and any requirements of ss.
422A of the Code, of such stock on the date on which such option is
granted.
<PAGE>
(b) Period for Exercise of Option. An option shall not be
exercisable after the expiration of such period as shall be fixed by
the Committee at the time of the grant thereof, but such period in no
event shall exceed ten (10) years and one day from the date on which
such option is granted; provided, that incentive stock options granted
hereunder shall have terms not in excess of ten (10) years and options
issued to Outside Directors shall be for a period of ten (10) years and
one day from the date of grant thereof. Options shall be subject to
earlier termination as hereinafter provided.
(c) Exercise of Options. The option price of each share of stock
purchased upon exercise of an option shall be paid in full at the time
of such exercise. Payment may be in (i) cash, (ii) if the Optionee may
do so in conformity with Regulation T (12 C.F.R. ss. 220.3(e)(4))
without violating ss. 16(b) or ss. 16(c)of the 1934 Act, pursuant to a
broker's cashless exercise procedure, by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Holding Company the total option price in cash
and, if desired, the amount of any taxes to be withheld from the
Optionee's compensation as a result of any withholding tax obligation
of the Holding Company or any of its Subsidiaries, as specified in such
notice, or (iii) beginning on a date which is three years following
Owen's conversion from mutual to stock form and with the approval of
the Committee, by tendering whole shares of the Holding Company's
Common Stock owned by the Optionee and cash having a fair market value
equal to the cash exercise price of the shares with respect to which
the option is being exercised. For this purpose, any shares so tendered
by an Optionee shall be deemed to have a fair market value equal to the
last quoted selling price for the shares on the date of exercise of the
option, as reported in The Wall Street Journal or a similar publication
selected by the Committee. The Committee shall have the authority to
grant options exercisable in full at any time during their term, or
exercisable in such installments at such times during their term as the
Committee may determine; provided, however, that options shall not be
exercisable during the first six (6) months of their term, and provided
further that, subject to the foregoing restriction, options granted to
Outside Directors shall become exercisable at the rate of 20% per year
beginning on the anniversary of the date of grant of such options.
Installments not purchased in earlier periods shall be cumulated and be
available for purchase in later periods. Subject to the other
provisions of this Plan, an option may be exercised at any time or from
time to time during the term of the option as to any or all whole
shares which have become subject to purchase pursuant to the terms of
the option or the Plan, but not at any time as to fewer than one
hundred (100) shares unless the remaining shares which have become
subject to purchase are fewer than one hundred (100) shares. An option
may be exercised only by written notice to the Holding Company, mailed
to the attention of its Secretary, signed by the Optionee (or such
other person or persons as shall demonstrate to the Holding Company his
or their right to exercise the option), specifying the number of shares
in respect of which it is being exercised, and accompanied by payment
in full in either cash or by check in the amount of the aggregate
purchase price therefor, by delivery of the irrevocable broker
instructions referred to above, or, if the Committee has approved the
use of the stock swap feature provided for above, followed as soon as
practicable by the delivery of the option price for such shares.
(d) Certificates. The certificate or certificates for the shares
issuable upon an exercise of an option shall be issued as promptly as
practicable after such exercise. An Optionee shall not have any rights
of a shareholder in respect to the shares of stock subject to an option
until the date of issuance of a stock certificate to him for such
shares. In no case may a fraction of a share be purchased or issued
under the Plan, but if, upon the exercise of an option, a fractional
share would otherwise be issuable, the Holding Company shall pay cash
in lieu thereof.
(e) Termination of Option. If an Optionee (other than an Outside
Director) ceases to be an employee of the Holding Company and the
Subsidiaries for any reason other than retirement, permanent and total
disability (within the meaning of ss. 22(e)(3) of the Code), or death,
any option granted to him shall forthwith terminate. Leave of absence
approved by the Committee shall not constitute cessation of employment.
If an Optionee (other than an Outside Director) ceases to be an
employee of the Holding Company and the Subsidiaries by reason of
retirement, any option granted to him may be exercised by him in whole
or in part within three (3) years after the date of his retirement, to
the extent the option was otherwise exercisable at the date of his
retirement; provided, however, that if such employee remains a director
or director emeritus of the Holding Company, the option granted to him
may be exercised by him in whole or in part until the later of (a)
three (3) years after the date of his retirement, or (b) six months
after his service as a director or director emeritus of the Holding
Company terminates. (The term "retirement" as used herein means such
termination of employment as shall entitle such individual to early or
normal retirement benefits under any then existing pension plan of the
<PAGE>
Holding Company or a Subsidiary.) If an Optionee (other than an Outside
Director) ceases to be an employee of the Holding Company and the
Subsidiaries by reason of permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), any option granted to him may be
exercised by him in whole or in part within one (1) year after the date
of his termination of employment by reason of such disability whether
or not the option was otherwise exercisable at the date of such
termination. Options granted to Outside Directors shall cease to be
exercisable six (6) months after the date such Outside Director is no
longer a director or director emeritus of the Holding Company for any
reason other than death or disability. If an Optionee who is an Outside
Director ceases to be a director and a director emeritus by reason of
disability, any option granted to him may be exercised in whole or in
part within one (1) year after the date the Optionee ceases to be a
director and a director emeritus by reason of such disability, whether
or not the option was otherwise exercisable at such date. In the event
of the death of an Optionee while in the employ or service as a
director or director emeritus of the Holding Company or a Subsidiary,
or, if the Optionee is not an Outside Director, within three (3) years
after the date of his retirement (or, if later, six months following
his termination of service as a director or director emeritus of the
Holding Company) or within one (1) year after the termination of his
employment by reason of permanent and total disability (within the
meaning of ss. 22(e)(3) of the Code), or, if the Optionee is an Outside
Director, within six (6) months after he is no longer a director and a
director emeritus of the Holding Company or of Owen for reasons other
than disability or, within one (1) year after the termination of his
service by reason of disability, any option granted to him may be
exercised in whole or in part at any time within one (1) year after the
date of such death by the executor or administrator of his estate or by
the person or persons entitled to the option by will or by applicable
laws of descent and distribution until the expiration of the option
term as fixed by the Committee, whether or not the option was otherwise
exercisable at the date of his death. Notwithstanding the foregoing
provisions of this subsection (e), no option shall in any event be
exercisable after the expiration of the period fixed by the Committee
in accordance with subsection (b) above.
(f) Nontransferability of Option. No option may be transferred by
the Optionee otherwise than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder, and during the lifetime of the
Optionee options shall be exercisable only by the Optionee or his
guardian or legal representative.
(g) No Right to Continued Service. Nothing in this Plan or in any
agreement entered into pursuant hereto shall confer on any person any
right to continue in the employ or service of the Holding Company or
its Subsidiaries or affect any rights the Holding Company, a
Subsidiary, or the shareholders of the Holding Company may have to
terminate his service at any time.
(h) Maximum Incentive Stock Options. The aggregate fair market
value of stock with respect to which incentive stock options (within
the meaning of ss. 422A of the Code) are exercisable for the first time
by an Optionee during any calendar year under the Plan or any other
plan of the Holding Company or its Subsidiaries shall not exceed
$100,000. For this purpose, the fair market value of such shares shall
be determined as of the date the option is granted and shall be
computed in such manner as shall be determined by the Committee,
consistent with the requirements of ss. 422A of the Code.
(i) Agreement. Each option shall be evidenced by an agreement
between the Optionee and the Holding Company which shall provide, among
other things, that, with respect to incentive stock options, the
Optionee will advise the Holding Company immediately upon any sale or
transfer of the shares of Common Stock received upon exercise of the
option to the extent such sale or transfer takes place prior to the
later of (a) two (2) years from the date of grant or (b) one (1) year
from the date of exercise.
(j) Investment Representations. Unless the shares subject to an
option are registered under applicable federal and state securities
laws, each Optionee by accepting an option shall be deemed to agree for
himself and his legal representatives that any option granted to him
and any and all shares of Common Stock purchased upon the exercise of
the option shall be acquired for investment and not with a view to, or
for the sale in connection with, any distribution thereof, and each
notice of the exercise of any portion of an option shall be accompanied
by a representation in writing, signed by the Optionee or his legal
<PAGE>
representatives, as the case may be, that the shares of Common Stock
are being acquired in good faith for investment and not with a view to,
or for sale in connection with, any distribution thereof (except in
case of the Optionee's legal representatives for distribution, but not
for sale, to his legal heirs, legatees and other testamentary
beneficiaries). Any shares issued pursuant to an exercise of an option
may bear a legend evidencing such representations and restrictions.
6. Incentive Stock Options and Non-Qualified Stock Options. Options
granted under the Plan may be incentive stock options under ss. 422A of the Code
or non-qualified stock options, provided, however, that Outside Directors shall
be granted only non-qualified stock options. All options granted hereunder will
be clearly identified as either incentive stock options or non-qualified stock
options. In no event will the exercise of an incentive stock option affect the
right to exercise any non-qualified stock option, nor shall the exercise of any
non-qualified stock option affect the right to exercise any incentive stock
option. Nothing in this Plan shall be construed to prohibit the grant of
incentive stock options and non-qualified stock options to the same person,
provided, further, that incentive stock options and non-qualified stock options
shall not be granted in a manner whereby the exercise of one non-qualified stock
option or incentive stock option affects the exercisability of the other.
7. Adjustment of Shares. In the event of any change after the effective
date of the Plan in the outstanding stock of the Holding Company by reason of
any reorganization, recapitalization, stock split, stock dividend, combination
of shares, exchange of shares, merger or consolidation, liquidation,
extraordinary distribution (consisting of cash, securities, or other assets), or
any other change after the effective date of the Plan in the nature of the
shares of stock of the Holding Company, the Committee shall determine what
changes, if any, are appropriate in the number and kind of shares reserved under
the Plan, and the Committee shall determine what changes, if any, are
appropriate in the option price under and the number and kind of shares covered
by outstanding options granted under the Plan. Any determination of the
Committee hereunder shall be conclusive.
8. Tax Withholding. Whenever the Holding Company proposes or is
required to issue or transfer shares of Common Stock under the Plan, the Holding
Company shall have the right to require the Optionee or his or her legal
representative to remit to the Holding Company an amount sufficient to satisfy
any federal, state and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares, and whenever under
the Plan payments are to be made in cash, such payments shall be net of an
amount sufficient to satisfy any federal, state and/or local withholding tax
requirements. If permitted by the Committee and pursuant to procedures
established by the Committee, an Optionee who is not an Outside Director may
make a written election to have shares of Common Stock having an aggregate fair
market value, as determined by the Committee, consistent with the requirements
of Treas. Reg. ss. 20.2031-2, sufficient to satisfy the applicable withholding
taxes, withheld from the shares otherwise to be received upon the exercise of a
non-qualified option.
9. Amendment. The Board of Directors of the Holding Company may amend
the Plan from time to time and, with the consent of the Optionee, the terms and
provisions of his option, except that without the approval of the holders of at
least a majority of the shares of the Holding Company voting in person or by
proxy at a duly constituted meeting or adjournment thereof:
(a) the number of shares of stock which may be reserved for
issuance under the Plan may not be increased except as provided in
Section 7 hereof;
(b) the period during which an option may be exercised may not
be extended beyond ten (10) years and one day from the date on which
such option was granted; and
(c) the class of persons to whom options may be granted under
the Plan shall not be modified materially.
No amendment of the Plan, however, may, without the consent of the
Optionees, make any changes in any outstanding options theretofore granted under
the Plan which would adversely affect the rights of such Optionees.
<PAGE>
10. Termination. The Board of Directors of the Holding Company may
terminate the Plan at any time and no option shall be granted thereafter. Such
termination, however, shall not affect the validity of any option theretofore
granted under the Plan. In any event, no incentive stock option may be granted
under the Plan after the date which is ten (10) years from the effective date of
the Plan.
11. Successors. This Plan shall be binding upon the successors and
assigns of the Holding Company.
12. Governing Law. The terms of any options granted hereunder and the
rights and obligations hereunder of the Holding Company, the Optionees and their
successors in interest shall, except to the extent governed by federal law, be
governed by Indiana law.
13. Government and Other Regulations. The obligations of the Holding
Company to issue or transfer and deliver shares under options granted under the
Plan shall be subject to compliance with all applicable laws, governmental rules
and regulations, and administrative action.
14. Effective Date. The Plan shall become effective on the date it is
adopted by the Holding Company's Board of Directors; provided, however, that any
grant of options pursuant to the Plan shall be subject to the approval of the
Plan by the holders of at least a majority of the shares of the Holding Company
entitled to vote at a duly constituted meeting or adjournment thereof and the
options granted pursuant to the Plan may not be exercised until the Board of
Directors of the Holding Company has been advised by counsel that such approval
has been obtained and all other applicable legal requirements have been met.
<PAGE>
Exhibit B
OWEN COMMUNITY BANK, S.B.
RECOGNITION AND RETENTION PLAN AND TRUST
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 Owen Community Bank, s.b. hereby establishes the Recognition and
Retention Plan (the "Plan") and Trust (the "Trust") upon the terms and
conditions hereinafter stated in this Recognition and Retention Plan and Trust
Agreement (the "Agreement").
1.02 The Trustee, which initially shall be Fifth Third Bank of Central
Indiana, hereby accepts this Trust and agrees to hold the Trust assets existing
on the date of this Agreement and all additions and accretions thereto upon the
terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain directors and executive officers
in key positions by providing such persons with a proprietary interest in the
Holding Company (as hereinafter defined) as compensation for their contributions
to the Holding Company and to the Bank and its Affiliates (as hereinafter
defined) and as an incentive to make such contributions and to promote the
Holding Company's and the Bank's growth and profitability in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, unless the context clearly indicates otherwise, shall have the
meanings set forth below. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" means the Holding Company and those subsidiaries or
affiliates of the Holding Company or the Bank which, with the consent of the
Board, agree to participate in this Plan.
3.02 "Bank" means Owen Community Bank, s.b. and its successors, whether in
mutual or stock form.
3.03 "Beneficiary" means the person or persons designated by a Recipient to
receive any benefits payable under the Plan in the event of such Recipient's
death. Such person or persons shall be designated in writing on forms provided
for this purpose by the Committee and may be changed from time to time by
similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or, if none, his estate.
3.04 "Board" means the Board of Directors of the Bank.
3.05 "Committee" means the Stock Compensation Committee of the Board of
Directors of the Holding Company. At all times during its administration of this
Plan, the Committee shall consist of two or more directors of the Holding
Company, each of whom shall be a "Non-Employee Director" within the meaning of
the definition of that term contained in Regulation 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "1934
Act").
3.06 "Common Stock" means shares of the common stock, without par value, of
the Holding Company.
3.07 "Conversion" shall mean the conversion of the Bank from the mutual to
stock form of organization and the simultaneous acquisition of the Bank by the
Holding Company.
<PAGE>
3.08 "Director" means a member of the Board of Directors of the Bank or the
Holding Company.
3.09 "Director Emeritus" shall mean an honorary, non-voting member of the
Board of Directors of the Bank or Holding Company.
3.10 "Disability" means any physical or mental impairment which qualifies
an Employee for disability benefits under the applicable long-term disability
plan maintained by the Bank or an Affiliate, or, if no such plan applies, which
would qualify such Employee for disability benefits under the long-term
disability plan maintained by the Bank, if such Employee were covered by that
Plan.
3.11 "Employee" means any person who is currently employed by the Bank or
an Affiliate, including officers.
3.12 "Holding Company" shall mean Home Financial Bancorp.
3.13 "Outside Director" means a member of the Board of Directors of the
Bank, who is not also an Employee.
3.14 "Plan Shares" means shares of Common Stock held in the Trust and
issued or issuable to a Recipient pursuant to the Plan.
3.15 "Plan Share Award" or "Award" means a right granted under this Plan to
earn Plan Shares.
3.16 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.03 and 5.04.
3.17 "Recipient" means an Employee or Outside Director who receives a Plan
Share Award under the Plan.
3.18 "Retirement" as to an Employee, means a termination of employment
which constitutes a "retirement" under any applicable qualified pension benefit
plan maintained by the Bank or an Affiliate which employs the Recipient, or, if
such plan is not applicable, which would constitute "retirement" under such plan
were the Recipient covered by such plan and, as to an Outside Director, means a
retirement from service on the Board after attaining age 70.
3.19 "Trustee" means that person(s) or entity nominated by the Committee
and approved by the Board pursuant to Sections 4.01 and 4.02 to hold legal title
to the Plan assets for the purposes set forth herein.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 Role of the Committee. The Plan shall be administered and interpreted
by the Committee, which shall have all of the powers allocated to it in this and
other Sections of the Plan. The interpretation and construction by the Committee
of any provisions of the Plan or of any Plan Share Award granted hereunder shall
be final and binding. The Committee shall act by vote or written consent of a
majority of its members. Subject to the express provisions and limitations of
the Plan, the Committee may adopt such rules, regulations and procedures as it
deems appropriate for the conduct of its affairs. If permitted by applicable
law, the Committee, with the consent of Recipients, may change the vesting
schedule for Awards after the date of grant thereof. The Committee shall
recommend to the Board one or more persons or entities to act as Trustee in
accordance with the provisions of this Plan and Trust and the terms of Article
VIII hereof.
4.02 Role of the Board. The members of the Committee and the Trustee shall
be appointed or approved by, and will serve at the pleasure of, the Board of
Directors of the Holding Company. The Board of Directors of the Holding Company
may in its discretion from time to time remove members from, or add members to,
the Committee, and may remove, replace or add Trustees.
4.03 Limitation on Liability. Neither a Director nor the Committee nor the
Trustee shall be liable for any determination made in good faith with respect to
the Plan or any Plan Shares or Plan Share Awards granted under it. If a Director
or the Committee or any Trustee is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of anything done or
<PAGE>
not done by him in such capacity under or with respect to the Plan, the Bank
shall indemnify such person against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Bank and its Affiliates and, with respect to any criminal action or proceeding,
if he had no reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTION; PLAN SHARE RESERVE
5.01 Amount and Timing of Contributions. The Bank shall be permitted to
contribute to the Trust an amount sufficient to purchase up to 4% of the shares
of Common Stock issued by the Holding Company in connection with the Conversion.
Such amounts shall be paid to the Trustee no later than the date required to
purchase shares of Common Stock for Awards made under this Plan. No
contributions by Employees or Outside Directors shall be permitted.
5.02 Initial Investment. Any amounts held by the Trust until such amounts
are invested in accordance with Section 5.03, shall be invested by the Trustee
in such interest-bearing account or accounts at the Bank as the Trustee shall
determine to be appropriate.
5.03 Investment of Trust Assets; Creation of Plan Share Reserve. As soon as
practicable following the first shareholder meeting of the Holding Company
following the Conversion ("First Shareholder Meeting Date"), the Trustee shall
invest all of the Trust's assets exclusively in the number of shares of Common
Stock, designated by the Bank as subject to Awards made under the Plan, which
may be purchased directly from the Holding Company, on the open market, or from
any other source; provided, however that the Trust shall not invest in an amount
of Common Stock greater than 4.0% of the shares of the Common Stock sold in the
Conversion, which shall constitute the "Plan Share Reserve" and provided,
further that if the Trustee is required to purchase such shares on the open
market or from the Holding Company for an amount per share greater than the
price per share at which shares were trading on the date the contributions
therefor were made to the Trust, the Bank shall have the discretion to reduce
the number of shares to be awarded and purchased. The Trust may hold cash in
interest-bearing accounts pending investment in Common Stock for periods of not
more than one year after deposit. The Trustee, in accordance with applicable
rules and regulations and Section 5.01 hereof, shall purchase shares of Common
Stock in the open market and/or shall purchase authorized but unissued shares of
the Common Stock from the Holding Company sufficient to acquire the requisite
percentage of shares. Any earnings received or distributions paid with respect
to Common Stock held in the Plan Share Reserve shall be held in an
interest-bearing account. Any earnings received with respect to Common Stock
subject to a Plan Share Award shall be held in an interest-bearing account on
behalf of the individual Recipient.
5.04 Effect of Allocations, Returns and Forfeitures Upon Plan Share
Reserves. Upon the allocation of Plan Share Awards under Sections 6.02 and 6.03
after acquisition by the Trustee of such shares, or the decision of the
Committee to return Plan Shares to the Holding Company, the Plan Share Reserve
shall be reduced by the number of Plan Shares so allocated or returned. Any
shares subject to an Award which may not be earned because of a forfeiture by
the Recipient pursuant to Section 7.01 shall be returned (added) to the Plan
Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 Eligibility. Employees of the Bank and its Affiliates are eligible to
receive Plan Share Awards provided in Section 6.02. Outside Directors of the
Bank are eligible to receive Plan Share Awards provided for in Section 6.03.
6.02 Allocations. The Committee may determine which of the Employees
referenced in Section 6.01 above will be granted Plan Share Awards and the
number of Plan Shares covered by each Award, including grants effective upon the
First Shareholder Meeting Date, provided, however, that the number of Plan
Shares covered by such Awards may not exceed the number of Plan Shares in the
Plan Share Reserve immediately prior to the grant of such Awards, and provided
further, that in no event shall any Awards be made which will violate the
Articles of Incorporation, Articles of Mutual Bank Conversion, Bylaws or Plan of
Conversion of the Holding Company or the Bank or any applicable federal or state
law or regulation and provided further that Awards may not be granted at any
time in which the Bank fails to meet its applicable minimum capital
requirements. In the event Plan Shares are forfeited for any reason and unless
the Committee decides to return the Plan Shares to the Holding Company, the
<PAGE>
Committee may, from time to time, determine which of the Employees referenced in
Section 6.01 above will be granted additional Plan Share Awards to be awarded
from forfeited Plan Shares. In selecting those Employees to whom Plan Share
Awards will be granted and the number of Plan Shares covered by such Awards, the
Committee shall consider the position and responsibilities of the eligible
Employees, the length and value of their services to the Bank and its
Affiliates, the compensation paid to such Employees, and any other factors the
Committee may deem relevant.
6.03 Allocations - Outside Directors. Each Outside Director serving in such
capacity as of the effective date of the Conversion shall be awarded a Plan
Share Award on the First Shareholder Meeting Date, assuming he is still serving
as an Outside Director on such date, equal to the number of whole shares rounded
as provided by the Committee constituting .2% of the number of shares of Common
Stock issued in the Conversion (the "Fixed Award"); provided, however, that the
Bank shall have the discretion to reduce such percentage if the Trustee is
required to purchase shares on the open market or from the Holding Company for
an amount per share greater than the price per share at which shares are sold in
the Conversion.
6.04 Form of Allocation. As promptly as practicable after a determination
is made pursuant to Section 6.02 or 6.03 that a Plan Share Award is to be made,
the Committee shall notify the Recipient in writing of the grant of the Award,
the number of Plan Shares covered by the Award, and the terms upon which the
Plan Shares subject to the Award may be earned. The stock certificate for Plan
Share Awards shall be registered in the name of the Recipient until forfeited or
transferred by the Recipient after such Award has been earned. The Committee
shall maintain records as to all grants of Plan Share Awards under the Plan.
6.05 Allocations Not Required. Notwithstanding anything to the contrary in
Sections 6.01 and 6.02, no Employee shall have any right or entitlement to
receive a Plan Share Award hereunder, such Awards being at the total discretion
of the Committee, nor shall the Employees as a group have such a right. No
Outside Director shall have any right or entitlement to reserve a Plan Share
Award hereunder, except as provided for in Section 6.03 hereof. The Committee
may, with the approval of the Board (or, if so directed by the Board, shall)
return all Common Stock in the Plan Share Reserve not yet allocated to the
Holding Company at any time, and cease issuing Plan Share Awards.
6.06. Distribution Election Before Plan Shares Are Earned. Notwithstanding
anything contained in the Plan to the contrary, an Employee or a Director who
has received an allocation of Plan Shares in accordance with Article VI may
request in writing that the Committee authorize the distribution to him or her
of all or a portion of the Plan Shares awarded before the date on which the Plan
Shares become earned in accordance with Article VII. The decision as to whether
to distribute to any Employee or Director who requests distribution shall be
made by the Committee, in its sole discretion. In addition, the distribution
shall be subject to the following parameters:
(a) The Committee shall be required to make a separate determination
for each request received by an Employee or Director for
distribution.
(b) Any Plan Shares awarded shall be required to have a legend on the
Plan Shares confirming that the Plan Shares are subject to
restriction and transfer in accordance with the terms set forth
in the Plan. This legend may not be removed until the date that
the Plan Shares become earned in accordance with Article VII.
(c) The Plan Shares distributed shall be voted by the Trustee in
accordance with Section 7.04 until the date that the Plan Shares
are earned.
(d) Any cash dividends or other cash distributions paid with respect
to the Plan Shares before the date that the Plan Shares are
earned shall be paid to the Trustee to be held for the Employee
or Director, whichever is applicable, until the date that the
Plan Shares are earned.
<PAGE>
(e) At the date on which the Plan Shares are earned, the Trustee may
withhold from any cash dividends or other cash distributions held
on behalf of such Employee or Director the amount needed to cover
any applicable withholding and employment taxes arising at the
time that the Plan Shares are earned. If the amount of such cash
dividends or distributions is insufficient, the Trustee may
require the Employee or Director to pay to the Trustee the amount
required to be withheld as a condition of removing the legend on
the Plan Shares.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 Earning Plan Shares; Forfeitures.
(a) General Rules. Plan Shares subject to an Award shall be earned by
a Recipient at the rate of twenty percent (20%) of the aggregate
number of Shares covered by the Award at the end of each full
twelve months of consecutive service with the Bank or an
Affiliate after the date of grant of the Award. If the term of
service of a Recipient terminates as an Employee, as a Director
and as a Director Emeritus prior to the fifth anniversary (or
such later date as the Committee shall determine) of the date of
grant of an Award for any reason (except as specifically provided
in Subsection (b) below or in Section 4.01 hereof), the Recipient
shall forfeit the right to earn any Shares subject to the Award
which have not theretofore been earned.
In determining the number of Plan Shares which are earned,
fractional shares shall be rounded down to the nearest whole
number, provided that such fractional shares shall be aggregated
and earned, on the fifth anniversary of the date of grant.
(b) Exception for Terminations due to Death and Disability.
Notwithstanding the general rule contained in Section 7.01(a)
above, all Plan Shares subject to a Plan Share Award held by a
Recipient whose term of service as an Employee and as a Director
or Director Emeritus with the Holding Company, Bank or an
Affiliate terminates due to death or Disability shall be deemed
earned as of the Recipient's last day of service with the Holding
Company, Bank or an Affiliate as a result of such death or
Disability. If the Recipient's service as an Employee and as a
Director or Director Emeritus terminates due to Disability within
one year of the effective date of the Conversion, the Shares
earned by the Recipient may not be disposed of by the Recipient
during the one-year period following the Conversion, and stock
certificate legends to that effect may be placed on the stock
certificates for any such shares.
(c) Revocation for Misconduct. Notwithstanding anything hereinafter
to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof,
previously awarded under this Plan, to the extent Plan Shares
have not been delivered thereunder to the Recipient, whether or
not yet earned, in the case of an Employee who is discharged from
the employ of the Holding Company, Bank or an Affiliate for cause
(as hereinafter defined), or who is discovered after termination
of employment to have engaged in conduct that would have
justified termination for cause or, in the case of an Outside
Director or Director Emeritus, who is removed from the Board of
Directors of the Bank and the Holding Company or an Affiliate for
cause (as hereinafter defined), or who is discovered after
termination of service as an Outside Director or Director
Emeritus to have engaged in conduct which would have justified
removal for cause. "Cause" is defined as personal dishonesty,
willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, or
the willful violation of any law, rule, regulation (other than
traffic violations or similar offenses) or order which results in
a loss to the Holding Company, Bank or any Affiliate or in a
final cease and desist order.
(d) Cessation of Payment. The Trustee shall cease payment of benefits
to Recipients or, if applicable, their Beneficiaries in the event
of the Bank's insolvency. The Bank shall be considered insolvent
for purposes of this RRP if the Bank is unable to pay its debts
<PAGE>
as they become due or if a receiver is appointed for the Bank
under applicable law. If payments cease by reason of this
subsection, payments will be resumed, with appropriate make-up
payments, once the Bank ceases to be insolvent but only to the
extent the payments were not made directly or its Affiliates.
7.02 Accrual of Dividends. Whenever Plan Shares are paid to a Recipient or
Beneficiary under Section 7.03, such Recipient or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends or cash distributions and a number of shares of Common Stock
or other assets equal to any stock dividends and any other assets distributions
declared and paid with respect to a share of Common Stock between the date the
Plan Shares are being distributed and the date the Plan Shares were granted.
There shall also be distributed an appropriate amount of net earnings, if any,
of the Trust with respect to any cash dividends or cash distributions so paid
out. Until the Plan Shares are vested and distributed to any such Recipient or
Beneficiary, such dividends, distributions and net earnings thereon, if any,
shall be retained by the Trust.
7.03 Distribution of Plan Shares.
(a) Timing of Distributions: General Rule. Plan Shares shall be
distributed to the Recipient or his Beneficiary, as the case may
be, as soon as practicable after they have been earned.
(b) Form of Distribution. All Plan Shares, together with any shares
representing stock dividends, shall be distributed in the form of
Common Stock. One share of Common Stock shall be given for each
Plan Share earned and payable. Payments representing accumulated
cash dividends and cash or other distributions (and earnings
thereon) shall be made in cash or in the form of such non-cash
distributions.
(c) Withholding. The Trustee may withhold from any payment or
distribution made under this Plan sufficient amounts of cash or
shares of Common Stock to cover any applicable withholding and
employment taxes, and if the amount of such payment is
insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be
withheld as a condition of delivering the Plan Shares.
Alternatively, a Recipient may pay to the Trustee that amount of
cash necessary to be withheld in taxes in lieu of any withholding
of payments or distribution under the Plan. The Trustee shall pay
over to the Holding Company, the Bank or Affiliate which employs
or employed such Recipient any such amount withheld from or paid
by the Recipient or Beneficiary.
(d) Cessation of Payment. The Trustee shall cease payment of benefits
to Recipients or, if applicable, their Beneficiaries in the event
of the Bank's insolvency. The Bank shall be considered insolvent
for purposes of this RRP if the Bank is unable to pay its debts
as they become due or if a receiver is appointed for the Bank
under applicable law. If payments cease by reason of this
subsection, payments will be resumed, with appropriate make-up
payments, once the Bank ceases to be insolvent but only to the
extent the payments were not made directly by the Bank or its
Affiliates.
7.04 Voting of Plan Shares. All shares of Common Stock held by the Trust
shall be voted by the Trustee, taking into account the best interests of the
Plan Share Award recipients.
ARTICLE VIII
TRUST
8.01 Trust. The Trustee shall receive, hold, administer, invest and make
distributions and disbursements from the Trust in accordance with the provisions
of the Plan and Trust and the applicable directions, rules, regulations,
procedures and policies established by the Committee pursuant to the Plan.
8.02 Management of Trust. It is the intent of this Plan and Trust that,
subject to the provisions of this Plan, the Trustee shall have complete
authority and discretion with respect to the management, control and investment
of the Trust, and that the Trustee shall invest all assets of the Trust, except
those attributable to cash dividends paid with respect to Plan Shares, in Common
Stock to the fullest extent practicable, and except to the extent that the
Trustee determines that the holding of monies in cash or cash equivalents is
necessary to meet the obligation of the Trust. Neither the Holding Company, the
<PAGE>
Bank, nor any Affiliate shall exercise any direct or indirect control or
influence over the time when, or the prices at which, the Trustee may purchase
such shares, the number of shares to be purchased, the manner in which the
shares are to be purchased, or the broker (if any) through whom the purchases
may be executed. In performing its duties, the Trustee shall have the power to
do all things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust assets in
Common Stock without regard to any law now or hereafter in force
limiting investments for Trustees or other fiduciaries. The
investment authorized herein and in paragraph (b) constitutes the
only investment of the Trust, and in making such investment, the
Trustee is authorized to purchase Common Stock from the Holding
Company or an Affiliate or from any other source and such Common
Stock so purchased may be outstanding, newly issued, or treasury
shares.
(b) To invest any Trust assets not otherwise invested in accordance
with (a) above in such deposit accounts, and certificates of
deposit (including those issued by the Bank), securities of any
open-end or closed-end management investment company or
investment trust registered under the Investment Company Act of
1940, whether or not the Trustee or any affiliate of the Trustee
is being compensated for providing services to the investment
company or trust as investment advisor or otherwise, obligations
of the United States government or its agencies or such other
investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at any
time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be registered in
the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records
shall be maintained showing that such security is an asset of the
Trust).
(e) To hold cash without interest in such amounts as may be in the
opinion of the Trustee reasonable for the proper operation of the
Plan and Trust and to hold cash pending investment.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their rights,
duties and obligations hereunder, and such other legal services
or representation as they may deem desirable.
(h) To hold funds and securities representing the amounts to be
distributed to a Recipient or his or her Beneficiary as a
consequence of a dispute as to the disposition thereof, whether
in a segregated account or held in common with other assets of
the Trust.
Notwithstanding anything herein contained to the contrary, the Trustee
shall not be required to make any inventory, appraisal or settlement or report
to any court, or to secure any order of court for the exercise of any power
herein contained, or give bond.
8.03 Records and Accounts. The Trustee shall maintain accurate and detailed
records and accounts of all transactions of the Trust, which shall be available
at all reasonable times for inspection by any legally entitled person or entity
to the extent required by applicable law, or any other person determined by the
Committee.
8.04 Earnings. All earnings, gains and losses with respect to Trust assets
shall be allocated, in accordance with a reasonable procedure adopted by the
Committee, to bookkeeping accounts for Recipients or to the general account of
the Trust, depending on the nature and allocation of the assets generating such
earnings, gains and losses. In particular, any earnings on cash dividends or
distributions received with respect to shares of Common Stock shall be allocated
to accounts for Recipients, if such shares are the subject of outstanding Plan
Share Awards, or otherwise to the Plan Share Reserve. Recipients (or their
Beneficiaries) shall not be entitled to any such allocations until the Plan
Share Awards to which they relate are vested and distributed to those Recipients
(or their Beneficiaries).
8.05 Expenses. All costs and expenses incurred in the operation and
administration of this Plan, including those incurred by the Trustee, shall be
borne by the Bank or the Holding Company.
8.06 Indemnification. The Bank shall indemnify, defend and hold the Trustee
harmless against all claims, expenses and liabilities arising out of or related
to the exercise of the Trustee's powers and the discharge of its duties
hereunder, unless the same shall be due to its negligence or willful misconduct.
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.01 Adjustments for Capital Changes. The aggregate number of Plan Shares
available for issuance pursuant to the Plan Share Awards (which, as of the
effective date of this Plan, shall not exceed 4% of the shares of the Holding
Company's Common Stock issued in the Conversion), and the number of shares to
which any Plan Share Award relates shall be proportionately adjusted for any
increase or decrease in the total number of outstanding shares of Common Stock
issued subsequent to the effective date of the Plan resulting from any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares, extraordinary cash or
non-cash distribution, or other similar capital adjustment, or other increase or
decrease in such shares effected without receipt or payment of consideration, by
the Committee.
9.02 Amendment and Termination of Plan. The Board may, by resolution, at
any time amend or terminate the Plan. The power to amend or terminate shall
include the power to direct the Trustee to return to the Holding Company all or
any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve, as well as shares of Common Stock and other assets
subject to Plan Share Awards but not yet earned by the Employees to whom they
are allocated. However, the termination of the Trust shall not affect a
Recipient's right to the distribution of Common Stock relating to Plan Share
Awards already earned, including earnings thereon, in accordance with the terms
of this Plan and the grant by the Committee.
9.03 Nontransferable. Plan Share Awards and rights to Plan Shares shall not
be transferable by a Recipient other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
during the lifetime of the Recipient, Plan Shares may only be earned by and paid
to the Recipient who was notified in writing of the Award by the Committee
pursuant to Section 6.03. The assets of the RRP, prior to the distribution of
Plan Shares to a Recipient or his or her Beneficiary, shall be subject to the
claims of creditors of the Bank. Unless Plan Shares are distributed in
accordance with Section 6.06 to a Recipient or his or her Beneficiary, such
Recipient or, if applicable, Beneficiary shall not have any right in or claim to
any specific assets of the RRP or Trust and shall only be unsecured creditor of
the Bank.
9.04 Employment Rights. Neither the Plan nor any grant of a Plan Share
Award or Plan Shares hereunder nor any action taken by the Trustee, the
Committee or the Board in connection with the Plan shall create any right on the
part of any Employee to continue in the employ of, or of any Outside Director to
continue in the service of, the Bank, the Holding Company or any Affiliate
thereof.
9.05 Voting and Dividend Rights. No Recipient shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award, except as expressly provided in Sections 7.02 and
7.04 above, prior to the time said Plan Shares are actually distributed to him.
9.06 Governing Laws. The Plan and Trust shall be governed by the laws of
the State of Indiana, except to the extent governed by federal law.
9.07 Effective Date. This Plan shall be effective as of the date it is
adopted by the Boards of Directors of the Bank and the Holding Company.
Following its adoption, the Plan shall be presented to shareholders of the
Holding Company for approval.
9.08 Term of Plan. This Plan shall remain in effect until the earlier of
(1) 21 years from the effective date of its adoption, (2) termination by the
Board, or (3) the distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share Awards previously granted, and such Awards
shall remain valid and in effect until they have been earned and paid, or by
their terms expire or are forfeited.
9.09 Tax Status of Trust. It is intended that the trust established hereby
be treated as a grantor trust of the Bank under the provisions of Section 671,
et seq., of the Internal Revenue Code of 1986, as amended.
9.10. Compensation. The Trustee shall be entitled to receive fair and
reasonable compensation for its services hereunder, as agreed to by the Trustee
and the Bank, and shall also be entitled to be reimbursed for all reasonable
out-of-pocket expenses, including, but not by way of limitation, legal,
actuarial and accounting expenses and all costs and expenses incurred in
prosecuting or defending any action concerning the Plan or the Trust or the
rights or responsibilities of any person hereunder, brought by or against the
Trustee. Such reasonable compensation and expenses shall be paid by the Bank.
<PAGE>
9.11. Resignation of Trustee. The Trustee may resign at any time by giving
sixty (60) calendar days' prior written notice to the Bank, and the Trustee may
be removed, with or without cause, by the Bank on sixty (60) calendar days'
prior written notice to the Trustee. Such prior written notice may be waived by
the party entitled to receive it. Upon any such resignation or removal becoming
effective, the Trustee shall render to the Bank a written account of its
administration of the Plan and the Trust for the period since the last written
accounting and shall do all necessary acts to transfer the assets of the Trust
to the successor Trustee or Trustees.
<PAGE>
REVOCABLE PROXY HOME FINANCIAL BANCORP
Annual Meeting of Shareholders
January 8, 1997
The undersigned hereby appoints Kurt D. Rosenberger and Jack Childers, with
full powers of substitution, to act as attorneys and proxies for the undersigned
to vote all shares of common stock of Home Financial Bancorp which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
at the Canyon Inn, Oak Room, McCormicks Creek State Park, State Highway 46,
Spencer, Indiana, on Wednesday, January 8, 1997, at 3:00 p.m., and at any and
all adjournments thereof, as follows:
1. The election as directors of all nominees listed below, except as marked to
the contrary |_| FOR |_| VOTE WITHHELD
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name on the list below:
John T. Gillaspy Robert W. Raper
(each for a one year term)
Charles W. Chambers Stephen Parrish
(each for a two year term)
Kurt J. Meier Frank R. Stewart Tad Wilson
(each for a three year term)
2. Approval and Ratification of the Home Financial Bancorp Stock Option Plan
|_| FOR |_| AGAINST |_| ABSTAIN
3. Approval and Ratification of the Owen Community Bank, s.b. Recognition and
Retention Plan and Trust.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Approval and Ratification of the appointment of Geo S. Olive & Co., LLC as
auditors for the year ending June 30, 1997.
|_| FOR |_| AGAINST |_| ABSTAIN
In their discretion, the proxies are authorized to vote on any other business
that may properly come before the Meeting or any adjournment thereof.
The Board of Directors recommends a vote "FOR" each of the listed propositions.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
This Proxy may be revoked at any time prior to the voting thereof.
The undersigned acknowledges receipt from Home Financial Bancorp, prior to the
execution of this Proxy, of a Notice of the Meeting, a Proxy Statement and an
Annual Report to Shareholders.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS
PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN THIS
PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS KNOWS
OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING.
__________________, 199___
NUMBER OF SHARES
-------------------------- ----------------------------
Print Name of Shareholder Print Name of Shareholder
-------------------------- ----------------------------
Signature of Shareholder Signature of Shareholder
Please sign as your name appears on the envelope in which this
card was mailed. When signing as attorney, executor,
administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
