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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[X] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14a-12
OLD NATIONAL BANCORP
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
[OLD NATIONAL BANCORP LOGO]
NOTICE OF
ANNUAL MEETING AND
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 2004
OLD NATIONAL BANCORP
420 MAIN STREET
EVANSVILLE, INDIANA 47708
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of Old
National Bancorp (the "Company") will be held on Thursday, April 29, 2004, at
10:00 a.m., Evansville time, at The Centre, 715 Locust Street, Evansville,
Indiana.
The Annual Meeting will be held for the following purposes:
1. The election of three Directors to Class II of the Company's Board of
Directors, each to serve a term of three years, until a successor has
been duly elected and qualified.
2. Ratification of the appointment of PricewaterhouseCoopers LLP as
independent accountants of the Company and its subsidiaries for the
fiscal year ending December 31, 2004.
3. Transaction of such other matters as may properly come before the
meeting or any adjournments and postponements thereof.
Shareholders of record at the close of business on February 25, 2004, are
entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of Directors
Jeffrey L. Knight
Senior Vice President and
Corporate Secretary
March 15, 2004
IMPORTANT
PLEASE SUBMIT YOUR PROXY PROMPTLY BY MAIL OR BY INTERNET. IN ORDER THAT THERE
MAY BE PROPER REPRESENTATION AT THE MEETING, YOU ARE URGED TO COMPLETE, SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED OR VOTE BY INTERNET,
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
OLD NATIONAL BANCORP
420 MAIN STREET
EVANSVILLE, INDIANA 47708
PROXY STATEMENT
This proxy statement is furnished to the shareholders of Old National
Bancorp (the "Company") in connection with the solicitation by the Board of
Directors of proxies to be voted at the Annual Meeting of Shareholders of the
Company to be held on Thursday, April 29, 2004, at 10:00 a.m., Evansville time,
at The Centre, 715 Locust Street, Evansville, Indiana, and at any and all
adjournments or postponements of such meeting (the "Annual Meeting"). A Notice
of Annual Meeting of Shareholders and form of proxy accompany this proxy
statement.
Any shareholder giving a proxy has the right to revoke it by voting in
person at the Annual Meeting, by timely delivery of a later-dated proxy or by a
written notice delivered to the Corporate Secretary of the Company, P.O. Box
718, Evansville, Indiana 47705-0718, at any time before such proxy is exercised.
All proxies will be voted in accordance with the directions of the shareholder
giving such proxy. To the extent no directions are given, proxies will be voted
"FOR" the election of the three persons named as nominees in this proxy
statement as Directors of the Company, and "FOR" the ratification of the
appointment of PricewaterhouseCoopers LLP as independent accountants of the
Company and its subsidiaries for the fiscal year ending December 31, 2004. With
respect to such other matters that may properly come before the Annual Meeting,
it is the intention of the persons named as proxies to vote in accordance with
their best judgment.
The complete mailing address of the principal executive offices of the
Company is Old National Bancorp, P.O. Box 718, Evansville, Indiana 47705-0718.
The approximate date on which this proxy statement and form of proxy for the
Annual Meeting are first being sent or given to shareholders of the Company is
March 15, 2004.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only shareholders of the Company of record at the close of business on
February 25, 2004, will be eligible to vote at the Annual Meeting.
The voting securities of the Company entitled to be voted at the Annual
Meeting consist only of common stock, without par value, of which 66,150,912
shares were issued and outstanding on the record date of February 25, 2004. The
Company has no other class of stock that is outstanding. Each shareholder of
record on the record date will be entitled to one vote for each share of common
stock registered in the shareholder's name.
As of February 25, 2004, to the knowledge of the Company, no person or firm,
other than the Company, beneficially owned more than 5% of the common stock of
the Company outstanding on that date. As of February 25, 2004, no individual
Director, nominee or officer beneficially owned more than 5% of the common stock
of the Company outstanding.
As of February 25, 2004, to the knowledge of the Company, only the Company
indirectly beneficially owned more than 5% of the outstanding common stock of
the Company. The Company indirectly owned 6,855,246 shares of common stock of
the Company, which constituted 10.36% of the outstanding common stock of the
Company on that date. These shares are held in various fiduciary capacities
through the Company's wholly-owned trust company.
1
ITEM 1. ELECTION OF DIRECTORS
The first item to be acted upon at the Annual Meeting of Shareholders is the
election of three Directors to Class II of the Board of Directors, each to hold
office for three years (until the 2007 Annual Meeting) and until his successor
shall have been duly elected and qualified.
In accordance with the Company's Articles of Incorporation, the Board of
Directors is divided into three classes with staggered terms. Each class is to
be elected to three (3) year terms with each term expiring in different years.
At each Annual Meeting the Directors or nominees constituting one class are
elected for a three (3) year term. The current Class II Directors' terms will
expire at the Annual Meeting on April 29, 2004. Any vacancies that occur after
the Directors are elected may be filled by the Board of Directors in accordance
with the By-Laws for the remainder of the full term of the vacant directorship.
The Board of Directors intends to nominate for election as Class II
Directors the following three (3) persons, all of whom are presently serving as
Class II Directors of the Company: David E. Eckerle, Niel C. Ellerbrook, and
Kelly N. Stanley. If any Director nominee named in this proxy statement shall
become unable or decline to serve (an event which the Board of Directors does
not anticipate), the persons named as proxies will have discretionary authority
to vote for a substitute nominee named by the Board of Directors, if the Board
determines to fill such nominee's position. Unless authorization is withheld,
the enclosed proxy, when properly signed and returned, will be voted "FOR" the
election as Directors of all of the nominees listed in this proxy statement.
Pages three through seven contain the following information with respect to
each Class II Director, and with respect to incumbent Directors in Classes I and
III of the Board of Directors who are not nominees for re-election at the Annual
Meeting: name; principal occupation or business experience for the last five
years; age; the year in which the nominee or incumbent Director first became a
Director of the Company; the number of shares of common stock of the Company
beneficially owned by the nominee or incumbent Director as of February 25, 2004;
and the percentage that the shares beneficially owned represent of the total
outstanding shares of the Company as of February 25, 2004. The number of shares
of common stock of the Company shown as being beneficially owned by each
Director nominee or incumbent Director includes those over which he or she has
either sole or shared voting or investment power.
2
INFORMATION REGARDING NOMINEES FOR
CLASS II DIRECTORS
(TERM TO EXPIRE 2007)
[DAVID E. ECKERLE [NIEL C. ELLERBROOK KELLY N. STANLEY
PHOTO] PHOTO] PHOTO
DAVID E. ECKERLE NIEL C. ELLERBROOK KELLY N. STANLEY
- FORMERLY COMMUNITY - CHAIRMAN OF THE - PRESIDENT, BMH
CHAIRMAN, OLD BOARD AND CEO, FOUNDATION, INC.
NATIONAL BANK VECTREN (2003 - present)
JASPER, INDIANA CORPORATION (Non-Profit
(AN AFFILIATE OF (2000 - present) Foundation)
THE COMPANY) (Utility) - PRESIDENT AND CEO,
(1998 - present) - PRESIDENT AND CEO, ONTARIO
- Age 60 INDIANA ENERGY CORPORATION
- Director since (1999 - 2000) (1998 - 2003)
1993 (Utility) (Diversified
- PRESIDENT AND COO, Technology/
INDIANA ENERGY Manufacturing
(1998 - 1999) Company)
- Age 55 - Age 60
- Director since - Director since
2002 2000
3
INFORMATION REGARDING INCUMBENT DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS
(TERM EXPIRING 2005)
[ALAN W. BRAUN [ANDREW E. GOEBEL
PHOTO] PHOTO]
ALAN W. BRAUN ANDREW E. GOEBEL
- CHAIRMAN AND CEO, - FINANCIAL AND
INDUSTRIAL MANAGEMENT
CONTRACTORS, INC. CONSULTANT
(2002 - present) (2003 - present)
(Construction) - PRESIDENT AND COO,
- PRESIDENT, VECTREN
INDUSTRIAL CORPORATION
CONTRACTORS, INC. (2000 - 2003)
(1998 - 2002) (Utility)
- Age 59 - PRESIDENT AND COO,
- Director since SIGCORP, INC.
1988 (1999 - 2000)
(Utility)
- PRESIDENT AND CEO,
SOUTHERN INDIANA
GAS & ELECTRIC
COMPANY
(1998 - 2000)
(Utility)
- Age 56
- Director since
2000
[LUCIEN H. MEIS [CHARLES D. STORMS
PHOTO] PHOTO]
LUCIEN H. MEIS CHARLES D. STORMS
- PRESIDENT, MEIS - PRESIDENT AND CEO,
VENTURES, INC. RED SPOT PAINT &
(1998 - present) VARNISH CO., INC.
(Financial (1998 - present)
Investments) (Manufacturer of
- Age 69 Industrial
- Director since Coatings)
1985 - Age 60
- Director since
1988
4
CLASS I DIRECTORS
(TERM EXPIRING 2006)
[LARRY E. DUNIGAN [DOUGLAS D. FRENCH [PHELPS L. LAMBERT
PHOTO] PHOTO] PHOTO]
LARRY E. DUNIGAN DOUGLAS D. FRENCH PHELPS L. LAMBERT
- CHIEF EXECUTIVE - PRESIDENT AND CEO, - MANAGING PARTNER,
OFFICER, HOLIDAY ASCENSION HEALTH BUSH AND LAMBERT
MANAGEMENT COMPANY (2001 - present) (1998 - present)
(1998 - present) (Health Care) (Investments)
(Health Care - EXECUTIVE VICE - Age 56
Services and PRESIDENT/COO, - Director since
Internet Services) ASCENSION HEALTH 1990
- Age 61 (1999 - 2001)
- Director since - EXECUTIVE VICE
1982 PRESIDENT/COO,
DAUGHTERS OF
CHARITY NATIONAL
HEALTH SYSTEM
(1998 - 1999)
(Health Care)
- Age 50
- Director since
2002
[LOUIS L. MERVIS [MARJORIE Z.
PHOTO] SOYUGENC PHOTO]
LOUIS L. MERVIS MARJORIE Z. SOYUGENC
- PRESIDENT, MERVIS - EXECUTIVE
INDUSTRIES, INC. DIRECTOR, WBH
(1998 - present) EVANSVILLE, INC.,
(Steel Fabricating) WELBORN
- Age 69 FOUNDATION, INC.
- Director since AND WELBORN
1996 BAPTIST
FOUNDATION, INC.
(1999 - Present)
(Nonprofit
foundation)
- PRESIDENT AND CEO,
WELBORN BAPTIST
HOSPITAL
(1998 - 1999)
(Health Care)
- Age 63
- Director since
1993
5
COMMON STOCK BENEFICIALLY OWNED BY DIRECTORS
AND EXECUTIVE OFFICERS
The following table sets forth information concerning beneficial ownership
of the shares of common stock of the Company on February 25, 2004, by each
Director and Named Executive Officer and by all Directors and Executive Officers
as a group.
NUMBER OF SHARES PERCENT OF
NAME OF PERSON BENEFICIALLY OWNED(1) COMMON STOCK
-------------- --------------------- ------------
Alan W. Braun..................... 212,948(2) *
Thomas F. Clayton................. 214,972(3) *
Larry E. Dunigan.................. 275,052(4) *
David E. Eckerle.................. 117,995(5) *
Niel C. Ellerbrook................ 1,953(6) *
Douglas D. French................. 471 *
Andrew E. Goebel.................. 8,643(7) *
Michael R. Hinton................. 221,285(8) *
Phelps L. Lambert................. 224,850(9) *
Lucien H. Meis.................... 92,237(10) *
Louis L. Mervis................... 1,798(11) *
Daryl D. Moore.................... 187,474(12) *
John S. Poelker................... 180,397(13) *
James A. Risinger................. 428,076(14) *
Marjorie Z. Soyugenc.............. 268,649(15) *
Kelly N. Stanley.................. 42,038(16) *
Charles D. Storms................. 62,273(17) *
Directors and Executive Officers
as a Group (17 persons)......... 2,541,111 3.84%
-------------------------
* Less than 1%
(1) Unless otherwise indicated in a footnote, each person listed in the table
possesses sole voting and sole investment power with respect to the shares
shown in the table to be owned by that person.
(2) Includes 62,569 shares held in The Braun Investment Partnership, L.P. of
which Mr. Braun is a general partner. Mr. Braun disclaims beneficial
ownership of the shares except to the extent of his pecuniary interest.
(3) Includes 13,662 shares held by Susan Clayton, Mr. Clayton's spouse. Also
includes 171,743 shares issuable to Mr. Clayton upon exercise of
outstanding stock options exercisable within 60 days.
(4) Includes 8,783 shares held by Kevin T. Dunigan Trust, Sharon Dunigan,
trustee; 9,559 shares held by Derek L. Dunigan Trust, Sharon Dunigan,
trustee; 2,363 shares held by Mitchell Ryan Dunigan Trust, Larry Dunigan,
trustee; and 42,674 shares held by Larry E. and Sharon Dunigan.
(5) Includes 21,726 shares held by Luella Eckerle, Mr. Eckerle's spouse. Also
includes 11,576 shares issuable to Mr. Eckerle upon exercise of
outstanding stock options immediately exercisable.
(6) Includes 373 shares held by Karen Ellerbrook, Mr. Ellerbrook's spouse.
(7) Includes 6,722 shares held by Darlene Goebel, Mr. Goebel's spouse.
(8) Includes 10,606 shares held by Debra D. Hinton, Mr. Hinton's spouse. Also
includes 176,993 shares issuable to Mr. Hinton upon exercise of
outstanding stock options exercisable within 60 days.
(9) Includes 11,198 shares held by Carol M. Lambert, Mr. Lambert's spouse.
(10) Includes 7,774 shares held by Alane Meis, Mr. Meis' spouse.
(11) The Mervis Charitable Remainder Trust and the Ellen Joy Mervis Trust own
41,988 shares of common stock of the Company with respect to which Mr.
Mervis disclaims beneficial ownership.
6
(12) Includes 162,818 shares issuable to Mr. Moore upon exercise of outstanding
stock options exercisable within 60 days.
(13) Includes 172,959 shares issuable to Mr. Poelker upon exercise of
outstanding stock options exercisable within 60 days.
(14) Includes 374,975 shares issuable to Mr. Risinger upon exercise of
outstanding stock options exercisable within 60 days.
(15) Includes 255,561 shares held by Rahmi Soyugenc, Ms. Soyugenc's spouse.
(16) Includes 206 shares held by Donna M. Stanley, Mr. Stanley's spouse. Also
includes 22,649 shares issuable to Mr. Stanley upon exercise of
outstanding stock options immediately exercisable.
(17) Includes 161 shares held by Elizabeth K. Storms, Mr. Storms' spouse.
EXECUTIVE OFFICERS OF THE COMPANY
The Executive Officers of the Company are listed in the table below. Each
officer serves a term of office of one year and until the election and
qualification of his or her successor.
NAME AGE OFFICE AND BUSINESS EXPERIENCE
---- --- ------------------------------
James A. Risinger 55 Chairman of the Board and Chief Executive Officer of the
Company since 1998, President of the Company from 2000 to
2003, and Director since 1997.
Thomas F. Clayton 58 Executive Vice President of the Company since January 2000
and Southern Regional Executive from 1997 to 2000.
Mark E. Faris 51 Executive Vice President of the Company since August 2003,
President and CEO of Old National Mortgage since November
2002, and Senior Vice President of the residential
mortgage division since June 2002. Previously, a self-
employed consultant from 1996 to 2002 and Executive Vice
President of Norwest Mortgage from 1986 to 1996.
Jerome J. Gassen 54 Executive Vice President of the Company since August 2003,
Northern Region President from 1999 to August 2003, and
President and Chief Operating Officer of American National
Bank and Trust Company of Muncie, Indiana from 1997 to
1999.
Daryl D. Moore 46 Executive Vice President of the Company since January 25,
2001 and Senior Vice President from 1996 to 2001.
Michael R. Hinton 49 President and Chief Operating Officer of the Company since
April 2003, Executive Vice President of the Company from
2000 to April 2003 and Community Chairman of Old National
Bank, Evansville, Indiana since January 2000. President of
Old National Bank (Evansville) from 1993 to 2000.
Annette W. Hudgions 46 Executive Vice President of the Company since August 2002
and President and CEO of Old National Service Division
since April 1997.
John S. Poelker 61 Executive Vice President of the Company since January
2000, Chief Financial Officer since 1998 and Senior Vice
President from 1998 to 2000.
7
MEETINGS AND COMMITTEES OF
THE BOARD OF DIRECTORS
The Board of Directors of the Company held seven meetings during the fiscal
year ended December 31, 2003. All incumbent Directors attended 75% or more of
the aggregate of the meetings of the Board and of the Board Committees to which
they were appointed.
Although the Company does not have a formal policy requiring board members
to attend the Annual Meeting of Shareholders, all of the directors attended the
Annual Meeting of Shareholders in 2003.
The members of the Company's Board of Directors are elected to various
committees. The standing committees of the Board of Directors include an
Executive Committee, an Audit Committee, a Compensation Committee, a Corporate
Governance and Nominating Committee, a Personnel Committee and a Funds
Management Committee.
When the Board is not in session, the Executive Committee has all of the
power and authority of the Board except with respect to amending the Articles of
Incorporation or By-Laws of the Company; approving an agreement of merger or
consolidation; recommending to the shareholders the sale, lease or exchange of
all or substantially all of the Company's property and assets; recommending to
the shareholders a dissolution of the Company or a revocation of such
dissolution; declaring dividends; or authorizing the issuance or reacquisition
of shares. The Executive Committee did not meet in 2003 and currently does not
have any permanent members.
The members of the Audit Committee are Andrew E. Goebel (Chairman), Larry E.
Dunigan, Phelps L. Lambert, Marjorie Z. Soyugenc and Kelly N. Stanley. The Audit
Committee held six meetings during 2003. The functions of the Audit Committee
are described under "Report of the Audit Committee" on pages 10 through 13. The
Audit Committee has adopted a written charter which has been approved by the
Board. A copy of the charter can be reviewed under the Corporate Governance link
on the Company's website at www.oldnational.com.
The members of the Corporate Governance and Nominating Committee are Larry
E. Dunigan (Chairman), Niel C. Ellerbrook, Douglas D. French, Phelps L. Lambert,
Marjorie Z. Soyugenc, Kelly N. Stanley and Charles D. Storms. The Corporate
Governance and Nominating Committee met two times in 2003. The functions of the
Corporate Governance and Nominating Committee are described under "Report of the
Corporate Governance and Nominating Committee" on pages 14 through 16. The
Corporate Governance and Nominating Committee has adopted a written charter
which has been approved by the Board. A copy of the charter can be reviewed
under the Corporate Governance link on the Company's website at
www.oldnational.com.
The members of the Compensation Committee are Charles D. Storms (Chairman),
Larry E. Dunigan, Niel C. Ellerbrook and Lucien H. Meis. The Compensation
Committee met seven times during 2003. The functions of the Compensation
Committee are described under "Report of the Compensation Committee" on pages 17
through 20. The Compensation Committee has adopted a written charter which has
been approved by the Board. A copy of the charter can be reviewed under the
Corporate Governance link on the Company's website at www.oldnational.com.
The members of the Personnel Committee are Marjorie Z. Soyugenc (Chairman),
Alan W. Braun, David E. Eckerle, Douglas D. French, Louis L. Mervis and Charles
D. Storms. The Personnel Committee met two times during 2003. The function of
the Personnel Committee is to review and approve changes in the Company's
employee benefit programs, plans and policies
8
relating to personnel issues. The Personnel Committee does not have a charter at
this time and is not required to have a charter under the rules of the New York
Stock Exchange.
The members of the Funds Management Committee are Phelps L. Lambert
(Chairman), David E. Eckerle, Andrew E. Goebel and Louis L. Mervis. The Funds
Management Committee met four times during 2003. The function of the Funds
Management Committee is to monitor the balance sheet risk profile of the Company
including credit, interest rate, liquidity and leverage risks. The Funds
Management Committee is also responsible for reviewing and approving the
investment policy for the Company. The Funds Management Committee does not have
a charter at this time and is not required to have a charter under the rules of
the New York Stock Exchange.
DIRECTOR COMPENSATION
All Directors of the Company received an annual retainer of $34,000 for
serving as Directors. $24,000 of the retainer is paid in cash, while $10,000 of
the retainer is paid in Company stock. Directors not otherwise employed by the
Company also received $1,000 for each Committee meeting attended and Audit
Committee members received $1,500 for each meeting attended. Directors serving
as a Committee Chairman received an additional annual retainer of $2,500.
INDEPENDENT ACCOUNTANTS' FEES
FEES PAID TO PRICEWATERHOUSECOOPERS LLP
The following table sets forth the aggregate fees for audit services
rendered by PricewaterhouseCoopers LLP in connection with the consolidated
financial statements and reports for fiscal year 2003 and for other services
rendered during fiscal year 2003 on behalf of the Company and its subsidiaries,
as well as all out-of-pocket costs incurred in connection with these services.
The aggregate fees included in Audit are fees billed for the fiscal years for
the audit of the registrant's annual financial statements and review of
financial statements and statutory and regulatory filings or engagements. The
aggregate fees included in each of the other categories are fees billed in the
fiscal years.
FISCAL 2003 FISCAL 2002
----------- -----------
AUDIT........................................... $805,202 $389,700
AUDIT RELATED................................... 0 56,810
TAX............................................. 2,763 82,763
ALL OTHER....................................... 10,200 83,550
-------- --------
TOTAL........................................... $818,165 $612,843
======== ========
AUDIT FEES:
Consists of fees billed for professional services rendered for (i) the audit
of Old National's consolidated financial statements, (ii) the review of the
interim condensed consolidated financial statements included in quarterly
reports, (iii) the services that are normally provided by PricewaterhouseCoopers
LLP in connection with statutory and regulatory filings or engagements, and (iv)
the attest services, except those not required by statute or regulation. The
aggregate fees of PricewaterhouseCoopers LLP for professional services rendered
for the audit of the Company's annual financial statement for the fiscal year
ended December 31, 2003 were $805,202, of which an aggregate amount of $392,258
had been billed through December 31, 2003.
9
AUDIT-RELATED FEES:
Consists of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
consolidated financial statements and are not reported under "Audit Fees". These
services include employee benefit plan audits, accounting consultations in
connection with acquisitions and divestitures, attest services that are not
required by statute or regulation, and consultations concerning financial
accounting and reporting standards.
TAX FEES:
Consists of fees billed for tax compliance/preparation and other tax
services. Tax compliance/preparation consists of fees billed for professional
services related to federal and state tax compliance, assistance with tax audits
and appeals and assistance related to the impact of mergers, acquisitions and
divestitures on tax return preparation. Other tax services consist of fees
billed for other miscellaneous tax consulting and planning and for individual
income tax preparation.
ALL OTHER FEES:
Consists of fees for all other services other than those reported above.
These services include benchmarking surveys and specialized consulting.
In making its recommendation to ratify the appointment of
PricewaterhouseCoopers LLP as Old National's independent accountants for the
fiscal year ending December 31, 2004, the Audit Committee has considered whether
services other than audit and audit-related provided by PricewaterhouseCoopers
LLP are compatible with maintaining the independence of PricewaterhouseCoopers
LLP.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT ACCOUNTANTS
All of the fees and services described above under "audit fees",
"audit-related fees", "tax fees" and "all other fees" were pre-approved by the
Audit Committee. The Audit Committee pre-approves all audit and permissible
non-audit services provided by the independent accountants. These services may
include audit services, audit-related services, tax services and other services.
The Audit Committee has adopted a policy for the pre-approval of services
provided by the independent accountants. Under the policy, pre-approval is
generally provided for up to one year and any pre-approval is detailed as to the
particular service or category of services and is subject to a specific budget.
In addition, the Audit Committee may also pre-approve particular services on a
case-by-case basis. For each proposed service, the independent auditor is
required to provide detailed supporting documentation at the time of approval.
The Audit Committee may delegate pre-approval authority to one or more of its
members. Such a member must report any decisions to the Audit Committee at the
next scheduled meeting.
REPORT OF THE AUDIT COMMITTEE
This Audit Committee report is being provided to inform shareholders of the
Audit Committee oversight with respect to the Company's financial reporting. The
Audit Committee operates under a written Audit Committee Charter, which was
updated in 2003 and meets the requirements of the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange ("NYSE").
10
INDEPENDENCE OF AUDIT COMMITTEE MEMBERS
The Audit Committee is comprised of five members of the Board of Directors
of the Company. All of the members of the Audit Committee are independent from
management and the Company (as independence is currently defined in the NYSE's
listing requirements).
SCOPE OF RESPONSIBILITIES
The Audit Committee's responsibilities include the authority and the
responsibility of selecting, evaluating and, where appropriate, replacing the
independent accountants; reviewing the scope, conduct and results of audits
performed; making inquiries as to the differences of views, if any, between such
independent accountants and officers and employees of the Company and
subsidiaries with respect to the financial statements and records and accounting
policies, principles, methods and systems; considering whether the provision by
the independent accountants of services for the Company in addition to the
annual audit examination is compatible with maintaining the independent
accountants' independence; reviewing the policies and guidelines of the Company
and subsidiaries designed to ensure the proper use and accounting for corporate
assets, and the activities of the Company's internal audit department;
preapproving all auditing services and permissible nonaudit services provided to
the Company by the independent accountants; reviewing any significant
disagreements between management and the independent accountants in connection
with the preparation of the financial statements; and discussing the quality and
adequacy of the Company's internal controls with management, the internal
auditors and the independent accountants.
2003 WORK OF THE AUDIT COMMITTEE
In fulfilling its oversight responsibilities in 2003, the Audit Committee
was actively involved in working with the Chief Credit Officer and the Chief
Financial Officer of the Company in ensuring that the Company has established
appropriate levels for its loan loss reserve. On several occasions, the Audit
Committee met both jointly and separately with representatives of Old National
Bank's primary federal regulator and management and with independent accountants
to ensure the accuracy of the Company's loan loss reserve methodology and loan
loss provision. The Audit Committee also discussed with management and
regulators the modifications undertaken by the Company to its credit approval
processes in order to address the high level of loan losses incurred during the
year.
In 2003, the Audit Committee was also involved in retaining Ethicspoint(R)
to assist the Audit Committee in administering the anonymous complaint
procedures outlined in the Code of Business Conduct and Ethics. The
Sarbanes-Oxley Act of 2002 required that the Audit Committee establish
procedures for the confidential submission of employee concerns regarding
questionable accounting, internal controls or auditing matters. This new system
was functional in January 2004, and the Audit Committee will continue to ensure
that the Company is in compliance with all applicable rules and regulations with
respect to the submission to the Audit Committee of anonymous complaints from
employees of the Company.
REVIEW WITH MANAGEMENT AND INDEPENDENT ACCOUNTANTS
The Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2003, and the footnotes thereto with
management and the independent accountants PricewaterhouseCoopers LLP. The Audit
Committee also received from management drafts of the Company's Quarterly
Reports on Form 10-Q and reviewed drafts of the Company's earnings releases
prior to public dissemination.
11
During the year, the Audit Committee monitored the efforts undertaken by the
Company to comply with the internal control certification and attestation
requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which efforts are
ongoing and are expected to be completed to meet the compliance and reporting
date of December 31, 2004.
The Audit Committee also reviewed with the Company's internal auditors and
independent accountants the overall scope and plans for their respective audit
activities. The Audit Committee also met with internal auditors and independent
accountants, with and without management present, to discuss the results of
their examination and their evaluations of internal controls. The Audit
Committee also reviewed with the independent accountants, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality and acceptability of the Company's financial reporting and such
other matters as are required to be discussed with the Audit Committee pursuant
to Statement of Auditing Standards No. 61, as amended.
The Audit Committee discussed with PricewaterhouseCoopers LLP their
independence from management and the Company, and received the written
disclosures and the letter from PricewaterhouseCoopers LLP required by the
Independence Standards Board Standard No. 1. The Audit Committee also
administered the Company's policy regarding engagement of independent
accountants to provide nonaudit services. In addition, the Audit Committee has
discussed with the independent accountants the accountants' independence from
management and the Company, including the matters in the accountants' written
disclosures required by the Independence Standards Board.
AUDIT COMMITTEE FINANCIAL EXPERT
During 2003, in accordance with Section 407 of the Sarbanes-Oxley Act of
2002, the Company identified Andrew E. Goebel as the Audit Committee's
"Financial Expert." Mr. Goebel is independent as defined under applicable SEC
rules.
REAPPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
The Audit Committee has reappointed PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal year 2004, subject to ratification
by the shareholders of the Company at the 2004 Annual Meeting.
ANNUAL COMMITTEE REVIEW OF CHARTER AND PERFORMANCE EVALUATION
As required by the Audit Committee's Charter, in early 2004 the Audit
Committee reviewed the Charter and determined that no modifications were
required or advisable at that time. Also, as required by the Audit Committee's
Charter, the Audit Committee conducted an annual performance evaluation, the
results of which have been discussed with the Audit Committee members and shared
with the Corporate Governance and Nominating Committee.
12
CONCLUSION
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2003, to be filed with the SEC.
Submitted by,
Andrew E. Goebel, Chairman
Larry E. Dunigan
Phelps L. Lambert
Marjorie Z. Soyugenc
Kelly N. Stanley
13
REPORT OF THE CORPORATE GOVERNANCE
AND NOMINATING COMMITTEE
The Corporate Governance and Nominating Committee (the "Corporate Governance
Committee") is primarily responsible for corporate governance matters affecting
the Company and its subsidiaries. The Corporate Governance Committee operates
under a written charter which conforms to the requirements of the SEC and the
NYSE.
INDEPENDENCE OF CORPORATE GOVERNANCE AND NOMINATING COMMITTEE MEMBERS
The Corporate Governance Committee is comprised of seven members of the
Board of Directors of the Company. All of the members of the Corporate
Governance Committee are independent from management and the Company (as
independence is currently defined in the NYSE's listing requirements).
SCOPE OF RESPONSIBILITIES
The Corporate Governance Committee has responsibility for recruiting and
nominating new Directors, assessing the independence of non-management
Directors, leading the Board in its annual performance evaluation, reviewing and
assessing the adequacy of the Corporate Governance Guidelines and retaining
outside advisors as needed to assist and advise the Board with respect to legal
and other accounting matters. The Corporate Governance Committee is also
responsible for reviewing with the full Board, on an annual basis, the requisite
skills and characteristics of Board members as well as the composition of the
Board as a whole.
DIRECTOR NOMINATION PROCEDURES
The Company's nomination procedures for Directors are governed by its
By-Laws. Each year the Corporate Governance Committee makes a recommendation to
the entire Board of Directors of nominees for election as Directors. The
Corporate Governance Committee will review suggestions from shareholders
regarding nominees for election as Directors. All such suggestions from
shareholders must be submitted in writing to the Corporate Governance Committee
at the Company's principal executive office not less than 120 days in advance of
the date of the annual or special meeting of shareholders at which Directors are
to be elected. All written suggestions of shareholders must set forth (i) the
name and address of the shareholder making the suggestion, (ii) the number and
class of shares owned by such shareholder, (iii) the name, address and age of
the suggested nominee for election as Director, (iv) the nominee's principal
occupation during the five years preceding the date of suggestion, (v) all other
information concerning the nominee as would be required to be included in the
proxy statement used to solicit proxies for the election of the suggested
nominee, and (vi) such other information as the Corporate Governance Committee
may reasonably request. Consent of the suggested nominee to serve as a Director
of the Company, if elected, must also be included with the written suggestion.
In seeking individuals to serve as Directors, the Corporate Governance
Committee seeks members from diverse professional backgrounds who combine a
broad spectrum of experience and expertise. Directors should have an active
interest in the business of the Company, possess a willingness to represent the
best interests of all shareholders, be able to objectively appraise management
performance, possess the highest personal and professional ethics, integrity and
values, and be able to comprehend and advise management on complicated issues
that face the Company and Board.
14
2003 WORK OF THE CORPORATE GOVERNANCE COMMITTEE
While newly created in 2003, the Corporate Governance Committee achieved
several accomplishments in its first year. Its first act was to assist the full
Board in formally delineating the responsibilities for each of the other Board
committees. Throughout the year, the Corporate Governance Committee gathered and
assessed information, as well as monitored events relating to corporate
governance.
Based upon its assessment of corporate governance matters, the Corporate
Governance Committee developed and recommended an initial set of Corporate
Governance Guidelines applicable to the full Board. The Corporate Governance
Guidelines have been approved by the full Board and may be viewed under the
Corporate Governance link on the Company's website at www.oldnational.com. In
addition, the Corporate Governance Committee developed a charter to govern its
operations. That charter is also available under the Corporate Governance link
on the Company's website. The Corporate Governance Committee also oversaw the
development of charters by the other Board committees which are required to have
charters under the NYSE listing standards, all of which are available under the
Corporate Governance link on the Company's website. Each of the charters has
been approved by the full Board. The Corporate Governance Committee anticipates
that the Corporate Governance Guidelines and each of the committee charters may
change over time in order to continuously reflect enhanced corporate governance
practices.
The Corporate Governance Committee and the Board also approved a Code of
Business Conduct and Ethics and a Senior Financial and Executive Officer Code of
Ethics in 2003. Copies of these Codes of Ethics are available under the
Corporate Governance link of the Company website. The Company intends to
disclose any amendments to, or a waiver of, a provision of these Codes of Ethics
on the Company's website.
The Corporate Governance Committee approved, and recommended to the full
Board for its approval, that executive sessions, where management is excluded,
be conducted on a regular basis at Board meetings. The Corporate Governance
Committee established and implemented a Board evaluation process pursuant to
which the Board critiqued its performance. The evaluation results were shared
with the full Board and committees and responsive actions are being implemented
as a result of that process.
The Corporate Governance Committee approved, and recommended to the Board
for its approval, that the Chairman of the Corporate Governance Committee serve
as the presiding director of the executive session meetings of the
non-management Directors of the Board. Larry E. Dunigan, the Chairman of the
Corporate Governance Committee, is the presiding director of the non-management
Directors of the Board when they meet in executive session.
CONTACTING THE BOARD OF DIRECTORS
Any shareholder or other interested party who desires to contact Old
National's presiding director or the other members of the Board of Directors may
do so by writing to: Board of Directors, c/o Corporate Secretary, Old National
Bancorp, P.O. Box 718, Evansville, IN 47708. Communications received are
distributed to the presiding director or other members of the Board, as
appropriate, depending on the facts and circumstances outlined in the
communication received. For example, if any complaints regarding accounting,
internal accounting controls and auditing matters are received, then they will
be forwarded by the Corporate Secretary to the Chairman of the Audit Committee
for review.
15
DIRECTOR INDEPENDENCE STANDARDS
In 2003, the Corporate Governance Committee developed and adopted
Independence Standards for Board members which were approved by the full Board.
Except for the Chairman and CEO, James A. Risinger, and one non-management Board
member, Alan W. Braun, the Board has determined that all of the members of the
Board of Directors meet the categorical standards for independence set forth in
Appendix I.
ANNUAL COMMITTEE REVIEW OF CHARTER AND PERFORMANCE EVALUATION
As required by the Corporate Governance Committee's Charter, in early 2004
the Corporate Governance Committee reviewed its Charter and made minor
modifications. Also, as required by the Corporate Governance Committee's
Charter, the Corporate Governance Committee conducted an annual performance
evaluation.
COMMITMENT
The Corporate Governance Committee is committed to ensuring that the Company
implements and follows corporate governance principles that are in furtherance
of the interests of the Company's shareholders. The Corporate Governance
Committee anticipates meeting throughout 2004 to continue to enhance the
Company's corporate governance principles and to ensure that the Company remains
compliant with the requirements of the SEC and the NYSE.
Submitted by,
Larry E. Dunigan, Chairman
Niel C. Ellerbrook
Douglas D. French
Phelps L. Lambert
Marjorie Z. Soyugenc
Kelly N. Stanley
Charley D. Storms
16
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is currently composed
of four non-employee Directors who are not eligible to participate in any
management compensation programs. The Compensation Committee operates under a
written charter which conforms to the requirements of the SEC and NYSE. An
independent compensation consulting firm, Mercer Human Resources Consulting, has
been retained by the Compensation Committee to advise the Compensation Committee
and Company on executive compensation matters.
INDEPENDENCE OF THE COMPENSATION COMMITTEE MEMBERS
The Compensation Committee is comprised of four members of the Board of
Directors of the Company. All of the members of the Compensation Committee are
independent from management and the Company (as independence is currently
defined in the NYSE's listing requirements).
SCOPE OF RESPONSIBILITIES
The Compensation Committee is appointed by the Board to discharge the
Board's responsibilities relating to the Company's officers and employees. The
Compensation Committee has overall responsibility for approving and evaluating
the compensation plans, policies and programs of the Company. The Compensation
Committee is responsible for annually reviewing and approving corporate goals
and objectives relevant to CEO compensation, evaluating the CEO's performance in
light of those goals and objectives, and approving the CEO's compensation level
based on this evaluation. The Compensation Committee is responsible for
reviewing on an annual basis and recommending to the Board of Directors for its
approval, for the Chairman and CEO and the next four highest paid officers of
the Company, (a) the annual base salary level, (b) the annual incentive
opportunity level, (c) the long-term incentive opportunity level, (d) employment
agreements, severance agreements and change in control agreements or provisions,
in each case as, when and if appropriate, and (e) any special or supplemental
benefits. The Compensation Committee is responsible for fixing and determining
awards to employees of stock or stock options pursuant to the Company's Equity
Incentive Plan(s) now or from time to time in effect and exercise such power and
authority as may be permitted or required by such plans.
ANNUAL COMMITTEE REVIEW OF CHARTER AND PERFORMANCE EVALUATION
As required by the Compensation Committee's Charter, in early 2004 the
Compensation Committee reviewed the Charter and determined that no modifications
were required or advisable at that time. Also, as required by the Compensation
Committee's Charter, the Compensation Committee conducted an annual performance
evaluation, the results of which have been discussed with the Compensation
Committee members and shared with the Corporate Governance Committee.
COMPENSATION PRINCIPLES
The Company's executive compensation program is structured to help the
Company achieve its business objectives by:
- setting compensation levels designed to attract and retain superior
executives in a highly competitive environment;
17
- providing incentive compensation that ties directly with both Company
financial performance and individual contribution to that performance; and
- linking compensation to elements that affect short- and long-term stock
performance.
The Compensation Committee believes the most effective executive
compensation program is one that provides incentives to achieve both current and
long-term strategic management goals of the Company, with the ultimate objective
of enhancing shareholder value. In this regard, the Compensation Committee
believes executive compensation should be comprised of cash and equity-based
programs which reward performance not only as measured against the Company's
specific annual and long-term goals, but also which recognize that the Company
operates in a competitive environment and that performance should be evaluated
as compared to industry peers. In April 1999, the Company's shareholders adopted
an equity incentive plan, which authorizes the Compensation Committee to grant
incentive and non-qualified stock options in addition to other forms of equity
compensation. The Compensation Committee issued 2,608,356 stock option grants to
executive officers of the Company in 2003. The equity-based compensation plans
assure that executive officers have a meaningful stake in the Company, the
ultimate value of which is dependent on the Company's continued long-term
success, and that the interests of executive officers are thereby aligned with
those of the shareholders.
COMPONENTS OF EXECUTIVE COMPENSATION
The compensation program for executive officers consists of the following
three components:
- base salary;
- the Short-Term Incentive Plan; and
- the 1999 Equity Incentive Plan.
BASE SALARY
The Compensation Committee establishes the salary of the Chairman and Chief
Executive Officer (hereinafter the "CEO"). The base salaries of the Company's
next four highest paid executive officers are determined by the Compensation
Committee. The same compensation principles are applied in setting the salaries
of all other executive officers to assure that salaries are fairly and
competitively established. Salary ranges are determined for each executive
position based upon survey data that is obtained from a relevant peer group and
from the Hay Group, Inc. The Company uses the Hay Job Evaluation System to
establish salary grades and ranges for each position based on the knowledge and
problem-solving ability required to satisfactorily fulfill the position's
assigned duties and responsibilities, its accountability and the impact on the
operations and profitability of the Company. The Company's peer group consists
of reasonably comparable regional bank holding companies. Relevant peer group
data is used rather than the NYSE Financial Index because the peer group
companies resemble more closely the asset size and operations of the Company.
The peer group data is also used to validate and affirm recommendations
presented by the Hay Group, Inc.
From survey data, salary ranges are established each year for the CEO and
all other executive positions within the organization. These ranges are designed
so that the mid-point of the salary range is approximately the 50th percentile
of base salaries paid to comparable positions across a broad spectrum of
comparable regional bank holding companies. Within these established ranges,
actual base salary adjustments are made periodically in accordance with the
guidelines of the Company's salary administration program and performance review
system. Continuous
18
outstanding performance over an extended period of time could result in a salary
at the top end of the established range whereas undistinguished performance
could result in compensation at the lower end of the range. In 2003, the base
salaries for the executive officers as a group and the CEO were within the
established salary ranges.
SHORT TERM INCENTIVE PLAN
In 1996, the Company established a Short Term Incentive Plan (the "STIP")
for certain key officers. The STIP provides for the payment of additional
compensation in the form of an annual cash incentive payment contingent upon the
achievement of certain corporate goals and the achievement of certain business
performance goals. The STIP uses various scorecards based on specific corporate
and shareholder-related performance goals relating to earnings per share and
operating income. Participants were assigned to one of the incentive scorecards
based upon their area of responsibility. The minimum incentive award that an
employee can earn is 5% of the participant's base salary. The award level is
based upon the Company's and the individual participant's performance. The
Company does not limit the amount of the award an employee or the CEO may earn
under the STIP. The CEO's minimum award opportunity is 27.5% of base salary.
Each fiscal year the Compensation Committee establishes threshold (minimum)
and target performance levels under the STIP. If threshold performance is not
achieved, there is no payment from the STIP for that period and, if performance
exceeds the threshold, actual incentive payments to participants are in
proportion to the actual financial performance achieved compared to the
performance goals. For 2003, the earnings per share and operating income
thresholds established by the Compensation Committee were not met, so there were
no STIP payouts for the Chairman and the next four highest paid executive
officers of the Company.
1999 EQUITY INCENTIVE PLAN
The Company maintains the 1999 Equity Incentive Plan (the "Plan"). The Board
and the Compensation Committee believe that this long-term, stock-based
incentive plan enhances the Company's ability to attract, retain and reward
management and provides the Company with the ability to develop incentive
programs which are responsive to the demands of the marketplace. The
Compensation Committee also believes that the stock option grants afford a
desirable long-term compensation method because they closely align the interests
of management with those of shareholders. Four hundred thirty-eight executive
officers, including those listed in the Summary Compensation Table, participate
in the Plan. During 2003, the Compensation Committee granted 2,608,356 stock
options to executive officers. In determining the grant of stock options to the
CEO, as well as other named officers in the Summary Compensation Table, the
Compensation Committee took into account the respective scope of responsibility,
performance requirements and recent and expected contributions of the Plan
participants to the Company's achievement of its long-term performance
objectives.
DISCUSSION OF 2003 COMPENSATION FOR THE CEO
Mr. Risinger has served as Chairman and Chief Executive Officer since
January 1, 1998. The Compensation Committee used the executive compensation
practices described above to determine Mr. Risinger's fiscal year 2003 base
salary. In setting both the cash-based and equity-based elements of Mr.
Risinger's compensation, the Compensation Committee made an overall assessment
of Mr. Risinger's leadership in establishing the Company's long-term and
short-term
19
strategic, operational and business goals. Mr. Risinger's total compensation
reflects a consideration of these competitive issues and the Company's
performance.
The Compensation Committee surveyed the total direct compensation for chief
executive officers of regional bank holding companies. Based on this
information, the Compensation Committee determined a median around which the
Compensation Committee built a competitive range for cash-based and equity-based
elements of the compensation package. As a result of this review, the
Compensation Committee determined a mix of base salary and bonus opportunity,
along with an equity position to align Mr. Risinger's compensation with the
performance of the Company. The resulting total compensation package was
competitive for CEOs in companies comparable in size and complexity to the
Company.
Additionally, as part of the review process, the Compensation Committee
assessed the Company's financial and business results compared to other
companies within the banking industry and the Company's financial performance
relative to its financial performance in prior periods and to its financial
goals.
For fiscal year 2003, the specific recommendation for Mr. Risinger
positioned his target total cash compensation at $1,019,193; base salary was set
at $658,932, with a $360,261 bonus opportunity under the STIP. Consistent with
the STIP, the performance objectives were based on the Company's earnings per
share.
In determining the stock option grant for Mr. Risinger, the Compensation
Committee evaluated his total direct compensation compared to CEO's of
comparable companies and determined that an award of a non-qualified stock
option to purchase 119,536 shares of the Company common stock was appropriate.
SUMMARY
The Compensation Committee is made up of non-employee directors who do not
participate in any of the compensation plans they administer. The Compensation
Committee approves or endorses all the programs that involve compensation paid
or awarded to senior executives.
The Compensation Committee is responsible for seeing that the Company's
compensation program serves the best interest of its shareholders. To help meet
this responsibility, the Compensation Committee is guided by an independent
analysis of the competitiveness of the Company's executive compensation. The
Compensation Committee also considers the results of the salary surveys
described above.
In the opinion of the Compensation Committee, the Company has an appropriate
and competitive compensation program. The combination of sound base salary,
competitive short term bonuses, and emphasis on long term incentives provides a
balanced and stable foundation for effective executive leadership.
Submitted by:
Charles D. Storms, Chairman
Larry E. Dunigan
Niel C. Ellerbrook
Lucien H. Meis
20
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table shows the annual compensation paid
by the Company to its Chief Executive Officer for 2003 and each of the four most
highly compensated executive officers, other than the Chief Executive Officer,
who were serving as executive officers as of December 31, 2003 (the "Named
Executive Officers"). The compensation of each of the Named Executive Officers
is reported for each of the last three years.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARD(S)
---------------------------------- -------------------------
(C)
NUMBER OF
SECURITIES
OTHER UNDERLYING (D)
(A) (B) ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION GRANTED COMPENSATION
--------------------------- ---- -------- -------- ------------ ---------- ------------
James A. Risinger*........ 2003 $691,119 $ 0 $5,914 119,536 $85,001
Chairman of the Board 2002 625,019 325,197 6,414 219,398 85,031
and Chief Executive Officer 2001 570,003 319,772 8,737 235,392 52,020
Michael R. Hinton......... 2003 $375,102 $ 0 $3,658 136,500 $42,906
President and Chief 2002 350,002 132,441 3,527 91,508 42,906
Operating Officer 2001 310,627 126,736 3,800 97,115 27,956
Thomas F. Clayton......... 2003 $352,102 $ 0 $7,567 115,500 $41,736
Executive Vice President 2002 337,002 127,521 6,920 91,508 41,736
Administration & 2001 310,627 126,736 6,186 97,115 27,956
Operations
Daryl R. Moore............ 2003 $286,118 $ 0 $7,261 79,800 $33,933
Executive Vice President 2002 275,018 104,067 7,262 91,508 33,933
Chief Credit Officer 2001 250,037 102,015 4,980 97,115 22,503
John S. Poelker........... 2003 $350,102 $ 0 $3,973 115,500 $31,952
Executive Vice President 2002 332,010 125,632 3,447 91,508 31,952
Chief Financial Officer 2001 305,011 124,445 3,447 98,330 21,351
---------------
(a) Salary includes base compensation and income recognized in the form of
Director fees paid by the Company or its subsidiaries during the indicated
calendar years.
(b) These amounts represent bonuses payable pursuant to the Company's Short Term
Incentive Plan (STIP).
(c) The options listed have been adjusted to reflect stock dividends.
(d) All Other Compensation includes the following for Messrs. Risinger, Clayton,
Hinton, Moore and Poelker for 2003: (i) Company contribution to the
Company's Employee Stock Ownership Plan of $18,000, $18,000, $18,000,
$18,000 and $14,000, for each Named Executive Officer, respectively; and
(ii) Company contribution to the Supplemental Deferred Compensation Plan of
$67,031, $23,736, $24,906, $15,933, and $17,952, for each Named Executive
Officer respectively.
* Mr. Risinger will retire as Chairman of the Board and Chief Executive
Officer effective March 31, 2004.
21
STOCK OPTION GRANTS
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in the fiscal year ended December
31, 2003.
INDIVIDUAL GRANT GRANT DATE VALUE(3)
----------------------------------------------- ------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED IN 2003(1) PRICE(2) DATE GRANT DATE PRESENT VALUE
---- ---------- ---------- -------- ---------- ------------------------
James A. Risinger................... 119,536 4.6% $21.71 1/31/13 $524,763
Michael R. Hinton................... 136,500 5.2% $21.71 1/31/13 $599,235
Thomas F. Clayton................... 115,500 4.3% $21.71 1/31/13 $507,045
Daryl D. Moore...................... 79,800 3.1% $21.71 1/31/13 $350,322
John S. Poelker..................... 115,500 4.3% $21.71 1/31/13 $507,045
---------------
(1) Based on an aggregate of 2,608,356 option shares granted in fiscal year
2003.
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of common stock on the option grant date,
which was equal to the closing price as reported by the NYSE on the option
grant date. The options vest over a four year period and the exercise price
may be paid in cash, in shares of the Company's common stock valued at fair
market value on the exercise date or through a cashless broker-assisted
exercise procedure involving a same-day sale of the purchased shares.
(3) Black-Scholes methodology utilized.
STOCK OPTION EXERCISES AND FINAL YEAR-END VALUES
The following table sets forth information concerning the fiscal year-end
number and value of unexercised options; and the number of options exercised
during fiscal year 2003 with respect to each of the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
James A. Risinger............ -- -- 244,081 380,996 -- --
Michael R. Hinton............ -- -- 99,501 240,775 -- --
Thomas F. Clayton............ -- -- 99,501 219,775 -- --
Daryl D. Moore............... -- -- 99,501 184,075 -- --
John S. Poelker.............. -- -- 100,717 220,991 -- --
---------------
(1) Based on the fair market value of the Company's Common Stock at fiscal year
end ($21.762 per share), and such value is equal to the closing price as
reported by the NYSE at that date, less the exercise price payable for such
shares.
RETIREMENT PLAN
The Old National Bancorp Employees' Retirement Plan (the "Retirement Plan")
is a qualified, defined benefit, non-contributory pension plan covering
substantially all employees of the Company and its subsidiaries and affiliates
with one or more years of service with the Company or its subsidiaries and
affiliates, and with credited service accruing from the date of employment,
provided that the employee has not less than 1,000 hours of service (as defined
in the plan) during such period.
22
The amount of annual contribution attributable to specific individuals
cannot be determined in a meaningful manner. The following table shows the
estimated annual pensions payable to eligible employees upon retirement at age
65. The amounts shown do not reflect any reduction related to Social Security
earnings or for the survivor benefit features of the Retirement Plan, the
application of which would reduce the amount of pension payable.
PENSION PLAN TABLE (1)
YEARS OF SERVICE
FINAL AVERAGE ------------------------------------------------------------------------
SALARY 5 10 15 20 25 30 35 & UP
------------- ------- ------- -------- -------- -------- -------- --------
$100,000............. $ 7,250 $14,500 $ 22,750 $ 31,000 $ 40,750 $ 50,500 $ 60,250
150,000............. 10,875 21,750 34,125 46,500 61,125 75,750 90,375
200,000............. 14,500 29,000 45,500 62,000 81,500 101,000 120,500
250,000............. 18,125 36,250 56,875 77,500 101,875 126,250 150,625
300,000............. 21,750 43,500 68,250 93,000 122,250 151,500 180,750
350,000............. 25,375 50,750 79,625 108,500 142,625 176,750 210,875
400,000............. 29,000 58,000 91,000 124,000 163,000 202,000 241,000
450,000............. 32,625 65,250 102,375 139,500 183,375 227,250 271,125
500,000............. 36,250 72,500 113,750 155,000 203,750 252,500 301,250
550,000............. 39,875 79,750 125,125 170,500 224,125 277,750 331,375
600,000............. 43,500 87,000 136,500 186,000 244,500 303,000 361,500
---------------
(1) The law in effect at December 31, 2003 prohibited the distribution of
benefits from the Retirement Plan in excess of $160,000 per year expressed
as a straight life annuity. It also prohibited compensation in excess of
$200,000 to be used in the computation of the retirement benefit. Both
amounts are indexed for inflation.
The Retirement Plan provides for the payment of monthly benefits in a fixed
amount upon attainment of age 65. As a normal form of benefit, each eligible
participant is entitled to receive a monthly pension for his or her life based
on years of service and "average monthly compensation" (which excludes bonuses).
In general, the formula for determining the amount of a participant's monthly
pension is average monthly compensation multiplied by 1.45% for the first ten
years of service, 1.65% for the next ten years of service, and 1.95% for the
next fifteen years of service, less any amount related to Social Security
earnings. In general, the amount of the reduction is .59% of average monthly
compensation (up to a maximum of 125% of covered compensation) multiplied by all
years of service up to 35 years of service. The standard retirement benefit for
married participants is payable in the form of a joint and survivor annuity in
an amount which is actuarially equivalent to the normal form of benefit. Instead
of an annuity, participants may elect to receive a single sum cash settlement
upon retirement in an amount that is actuarially equivalent to the participant's
normal form of benefit.
2003 base salary figures for the CEO and the next four most highly
compensated Executive Officers of the Company are set forth in column (a) in the
Summary Compensation Table on page 21. The Retirement Plan was frozen as of
December 31, 2001, except for employees who were at least age 50 or who had 20
years of vested service as of December 31, 2001. As of December 31, 2003, Mr.
Risinger had 26 years of vested service; Mr. Hinton, 24 years; Mr. Clayton, 16
years; and Mr. Moore, 25 years. Mr. Poelker is not accruing benefits under this
Plan but does continue to accrue service for eligibility of an immediate early
retirement benefit.
For certain employees, in addition to the persons listed in the Summary
Compensation Table, whose annual retirement income benefits under the Retirement
Plan exceed the limitations imposed by the Internal Revenue Code of 1986, as
amended, and the regulations thereunder (including, among others, the limitation
that annual benefits paid under qualified
23
defined benefit pension plans may not exceed $160,000), such excess benefits
will be paid from the Company's non-qualified, unfunded, non-contributory
supplemental retirement plan.
AGREEMENTS WITH CERTAIN OFFICERS
On January 1, 2004, the Company entered into new change of control severance
agreements with Messrs. James A. Risinger, Thomas F. Clayton, Michael R. Hinton,
Daryl D. Moore and John S. Poelker. Each executive is entitled to benefits under
his severance agreement upon any termination of the executive's employment by
the Company (except for, and as is more specifically described in each severance
agreement, termination for cause, disability, voluntary retirement or death), or
upon a termination of employment by the executive under certain circumstances
specified in his severance agreement, during the two-year period following a
change in control (as defined in the severance agreements) of the Company which
occurs during the term of the severance agreement.
In the event of a termination of employment, the executive will be entitled
to receive a lump sum cash payment equal to the aggregate of: his then-effective
base salary through the date of termination; all amounts due to the executive
under the Company's accrued vacation program through the date of termination;
and a certain amount under the Retirement Plan. In addition, the Company must
pay to James A. Risinger, Thomas F. Clayton, Michael R. Hinton and John S.
Poelker in a lump sum cash payment an amount equal to 2.99 times the average
annual base salary paid to him by the Company in the five calendar years
preceding the date of termination. For Daryl D. Moore, the lump sum payment is
equal to two times the average annual base salary paid to him by the Company in
the five calendar years preceding the date of termination. The severance
agreements further require the Company to cause to be vested in each executive's
name those awarded but unvested shares held in the executive's account in the
Restricted Stock Plan and Stock Option Plan and all amounts due the executive
under the Company's Short Term Incentive Plan.
24
SHAREHOLDER RETURN PERFORMANCE COMPARISONS
The Company is required to include in this proxy statement a line graph
comparing cumulative five-year total shareholder returns for the Company's
common stock to cumulative total returns of a broad-based equity market index
and a published industry index. The following indexed graph compares the
performance of the Company's common stock for the past five years to the Russell
1000 Index and the NYSE Financial Index.
(PERFORMANCE GRAPH)
OLD NATIONAL BANCORP RUSSELL 1000 NYSE FINANCIAL
-------------------- ------------ --------------
12/31/98 100.00 100.00 100.00
12/31/99 93.54 120.93 99.08
12/31/00 92.35 110.24 124.08
12/31/01 84.05 105.87 113.87
12/31/02 87.44 81.59 97.90
12/31/03 89.27 104.05 125.64
The comparison of shareholder returns (change in December year end stock
price plus reinvested dividends) for each of the periods assumes that $100 was
invested on December 31, 1998, in common stock of each of the Company, the
Russell 1000 Index, and the NYSE Financial Index with investment weighted on the
basis of market capitalization.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Executive Officers and Directors of the Company are at present, as in
the past, customers of one or more of the Company's subsidiaries and have had
and expect in the future to have similar transactions with the subsidiaries in
the ordinary course of business. In addition, some of the Executive Officers and
Directors of the Company are at present, as in the past, officers, Directors or
principal shareholders of corporations which are customers of these subsidiaries
and which have had and expect to have transactions with the subsidiaries in the
ordinary course of business. All such transactions were made in the ordinary
course of business, on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons and did not involve more than the normal risk of collectibility or
present other unfavorable features.
During 2003, the Company paid $32,072,248.87 for engineering, design and
construction services to Industrial Contractors, Inc. in connection with its
role as general contractor for the construction of the Company's new
headquarters building in Evansville and for renovations to the Old National Bank
Tower, renovations to the Operations Center in Evansville and for work at other
Old National Bank branch locations. Alan W. Braun, Chairman and CEO of
Industrial Contractors Inc., is currently a Director of the Company.
25
ITEM 2. RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors proposes the ratification by the shareholders at the
Annual Meeting of the Audit Committee's appointment of PricewaterhouseCoopers
LLP, Chicago, Illinois, as independent accountants for the Company and its
subsidiaries for the fiscal year ending December 31, 2004. Although ratification
by the shareholders of the Company's independent accountants is not required,
the Company deems it desirable to continue its established practice of
submitting such selection to the shareholders. In the event the appointment of
PricewaterhouseCoopers LLP is not ratified by the shareholders, the Audit
Committee of the Board of Directors will consider appointment of other
independent accountants for the fiscal year ending December 31, 2004. A
representative of PricewaterhouseCoopers LLP will be present at the Annual
Meeting and will have the opportunity to make a statement or respond to any
appropriate questions that shareholders may have.
SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS FOR THE 2005 ANNUAL MEETING
Proposals submitted by shareholders under Rule 14a-8 of the SEC to be
presented at the 2005 Annual Meeting of Shareholders must be received by the
Company at its principal executive office no later than November 15, 2004, to be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting. Any such proposals should be sent to the attention of the
Corporate Secretary of the Company, P.O. Box 718, Evansville, Indiana
47705-0718. If notice of any other shareholder proposal intended to be presented
at the 2005 Annual Meeting of Shareholders is not received by the Company on or
before December 30, 2004, the proxy solicited by the Board of Directors of the
Company for use in connection with that meeting may confer authority on the
proxies to vote in their discretion on such proposal, without any discussion in
the Company's proxy statement for that meeting of either the proposal or how
such proxies intend to exercise their voting discretion.
All nominations of persons to serve as Directors of the Company must be made
in accordance with the requirements contained in the Company's By-Laws. See the
description of the nomination procedures contained in the Corporate Governance
and Nominating Committee Report on pages 14 through 16.
VOTE REQUIRED
The nominees for election as Directors of the Company named in this proxy
statement will be elected by a plurality of the votes cast. Action on the other
items or matters to be presented at the Annual Meeting will be approved if the
votes cast in favor of the action exceed the votes cast opposing the action.
Abstentions or broker non-votes will not be voted for or against any items or
other matters presented at the meeting. Abstentions will be counted for purposes
of determining the presence of a quorum at the Annual Meeting, but broker
non-votes will not be counted for quorum purposes if the broker has failed to
vote as to all matters.
26
ANNUAL REPORT
UPON WRITTEN REQUEST, THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH
SHAREHOLDER WHO DOES NOT OTHERWISE RECEIVE A COPY OF THE COMPANY'S ANNUAL REPORT
TO SHAREHOLDERS A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WHICH IS
REQUIRED TO BE FILED WITH THE SEC FOR THE YEAR ENDED DECEMBER 31, 2003. ADDRESS
ALL REQUESTS TO:
CANDICE JENKINS, VICE PRESIDENT & CONTROLLER
OLD NATIONAL BANCORP
P. O. BOX 718
EVANSVILLE, INDIANA 47705-0718
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers and persons who beneficially own more than ten
percent of the Company common shares to file with the SEC reports showing
ownership of and changes of ownership in the Company's common shares and other
equity securities. On the basis of reports and representations submitted by the
Company's Directors, Executive Officers, and greater-than-ten-percent owners,
the Company believes that all required Section 16(a) filings for fiscal year
2003 were timely made, except for the following transaction of one Director that
was not timely filed due to inadvertence: one report for Mr. Braun pertaining to
shares of company stock held in a limited general partnership of which Mr. Braun
disclaims beneficial ownership of the shares except to the extent of his
pecuniary interest.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters for
action by shareholders at the 2004 Annual Meeting other than the matters
described in the accompanying Notice of Annual Meeting of Shareholders. However,
the enclosed proxy will confer upon the named proxies discretionary authority
with respect to matters which are not known to the Board of Directors at the
time of the printing hereof and which may properly come before the Annual
Meeting. It is the intention of the persons named as proxies to vote pursuant to
the proxy with respect to such matters in accordance with their best judgment.
The cost of soliciting proxies in the accompanying form will be borne by the
Company. In addition to solicitations by mail, Directors and Officers of the
Company and its subsidiaries may solicit proxies personally, by telephone or in
person, but such persons will not be specially compensated for their services.
Specially engaged employees of the Company or other paid solicitors will make no
solicitations.
It is important that proxies be returned promptly. WHETHER OR NOT YOU EXPECT
TO ATTEND THE ANNUAL MEETING IN PERSON, SHAREHOLDERS ARE REQUESTED TO COMPLETE,
SIGN AND RETURN THEIR PROXIES IN ORDER THAT A QUORUM FOR THE ANNUAL MEETING MAY
BE ASSURED. You may also vote your proxy by Internet. If you do not vote your
proxy by Internet, then it may be mailed in the enclosed envelope, to which no
postage need be affixed.
27
APPENDIX I
DIRECTOR INDEPENDENCE STANDARDS
The Board will have a majority of Directors who meet the criteria for
independence required by Section 303A(2) of NYSE Listed Company Manual. No
director shall qualify as "independent" unless the Board affirmatively
determines that the director has no material relationship with the Company
(either directly or as a partner, shareholder or officer of an organization that
has a relationship with the Company). In making a determination as to whether to
designate a Director as an "Independent Director," the Board will consider the
following categorical standards, but may to the extent consistent with Section
303A(2) of the NYSE Listed Company Manual review any other facts and
circumstances that it may deem relevant.
The Board believes an "Independent Director" is one who meets all of the
following criteria:
a. is not currently employed by the Company or any of its affiliates.
b. does not receive, and does not have an immediate family member who
receives, or has received within the past five (5) years, more than
$100,000 per year in direct compensation from the Company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service); provided that the foregoing
will create only a presumption that the director is not an Independent
Director which can be rebutted by a determination by the Board, with the
assent of all Independent Directors, that, based upon the relevant facts
and circumstances, that the compensatory relationship is not material;
and provided that compensation for former service as an interim Chairman
or CEO does not need to be considered as a factor towards a
determination of independence under the presumption.
c. is not, and has not been affiliated with or employed by, and does not
have an immediate family member who is affiliated with or employed in a
professional capacity by, within the last five (5) years, any (present
or former) auditor of the Company.
d. is not an executive officer or an employee, and does not have an
immediate family member who is an executive officer, of another company
(A) that accounts for, or within the last five (5) years accounted for,
at least 2% or $1 million, whichever is greater, of the Company's
consolidated annual gross revenues, or (B) for which the Company
accounts for, within the last five (5) years accounted for, at least 2%
or $1 million, whichever is greater, of such other company's
consolidated annual gross revenues.
e. is not employed, and does not have an immediate family member who is
employed, within the last five (5) years, as an executive officer of
another company where any of the Company's present executives serve on
such other company's compensation committee.
For purposes of the foregoing, (i) "immediate family member" includes a
person's spouse, parents, children, siblings, mothers- and fathers-in-law, sons-
and daughters-in-law, brothers- and sisters-in-law and anyone (other than
domestic employees) sharing such person's home; and (ii) during the five years
immediately following the effective date of Section 303(A)(2)(b) of the NYSE
Listed Companies Manual (the "Effective Date"), each five year "look back"
period referenced above shall instead be limited to the period since the
Effective Date.
28
Additionally, a director of the Company will not fail to be deemed
"Independent" for purposes of the NYSE Listed Company Manual solely as a result
of lending relationships (such as depository, transfer, register, indenture
trustee, trusts and estates, private banking, investment management, custodial,
securities brokerage, cash management and similar services) between the Company
and its subsidiaries, on the one hand, and a company with which the director is
affiliated by reason of being a director, officer or a significant shareholder
thereof, on the other, provided that the relationship complies with paragraph
(d) above and:
a. such relationships are in the ordinary course of business of the Company
and are on substantially the same terms as those prevailing at the time
for comparable transactions with non-affiliated persons; and
b. with respect to extensions of credit by the Company or its subsidiaries:
i. such extensions of credit have been made in compliance with
applicable law, including Regulation O of the Board of Governors of
the Federal Reserve, Sections 23A and 23B of the Federal Reserve Act
and Section 13(k) of the Securities Exchange Act of 1934; and
ii. no event of default has occurred under the loan.
29
OLD NATIONAL BANCORP
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON APRIL 29, 2004, AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
The undersigned hereby appoints Stephan E. Weitzel, Joseph T. Theby, III, and
Jeffrey L. Knight, and each of them singly, as Proxies of the undersigned, each
with power to appoint his substitute, and hereby authorizes each of them to
represent and to vote, as indicated herein, all the shares of common stock of
OLD NATIONAL BANCORP held of record by the undersigned on February 25, 2004, and
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on April 29, 2004, and all adjournments or postponements thereof, on
the following matters.
1. The election of Directors in Class II as indicated below to serve for a
three-year term and until the election and qualification of their
respective successors. (Mark only one box below.)
01 - David E. Eckerle, 02 - Niel C. Ellerbrook, 03 - Kelly N. Stanley
[ ] FOR ALL NOMINEES LISTED HEREIN (except as indicated below) [ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
Instruction: To withhold authority to vote for any individual nominee,
print the number(s) of the nominee(s) on the line provided.________________
2. Ratification of the appointment of PricewaterhouseCoopers LLP, as
independent accountants of OLD NATIONAL BANCORP and its subsidiaries for
the fiscal year ending December 31, 2004.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. The Proxies are hereby granted authority to vote, in their discretion, upon
such other business as may properly come before the April 29, 2004 Annual
Meeting and any adjournments or postponements thereof.
This PROXY, when properly executed, will be voted in the manner directed
herein by the undersigned SHAREHOLDER(S). IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
ALL EARLIER PROXIES ARE HEREBY REVOKED.
-----------------------------------------
Signature(s) Date
-----------------------------------------
Signature(s) Date
Joint owners should each sign personally.
Trustees, corporate officers and others
signing in a representative capacity
should indicate the capacity in which
they sign.