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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)(4) 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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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
ONE 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 28, 2005, 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 four Directors to Class III 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, 2005.
3. The approval of the Old National Bancorp Short-Term Incentive
Compensation Plan.
4. 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 24, 2005, are
entitled to notice of and to vote at the Annual Meeting.
AN ADMISSION TICKET, WHICH CAN BE FOUND ATTACHED TO THE PROXY CARD, IS
REQUIRED FOR ADMITTANCE TO THE ANNUAL MEETING. PLEASE NOTE THAT IF YOU HOLD YOUR
SHARES IN "STREET NAME" (THAT IS, THROUGH A BROKER OR OTHER NOMINEE), YOU WILL
NEED TO BRING A COPY OF A BROKERAGE STATEMENT REFLECTING YOUR STOCK OWNERSHIP AS
OF THE RECORD DATE FOR ADMITTANCE TO THE MEETING.
By Order of the Board of Directors
Jeffrey L. Knight
Executive Vice President and
Corporate Secretary
March 16, 2005
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
ONE 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 28, 2005, 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 at 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 four persons named as nominees in this proxy statement
as Directors of the Company, "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, 2005, and "FOR" the
approval of the Old National Bancorp Short-Term Incentive Compensation Plan.
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 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 16, 2005.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
Only shareholders of the Company of record at the close of business on
February 24, 2005, 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 68,396,129
shares were issued and outstanding on the record date of February 24, 2005. 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 24, 2005, 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 24, 2005, no individual
Director, nominee or officer beneficially owned more than 5% of the common stock
of the Company outstanding.
As of February 24, 2005, 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 6,481,326 shares of common stock of
the Company, which constituted 9.5% 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 four Directors to Class III of the Board of Directors, each to hold
office for three years (until the 2008 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 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 year term. The current Class III Directors' terms will expire at the
Annual Meeting, on April 28, 2005. 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 III
Directors the following four persons, all of whom are presently serving as Class
III Directors of the Company: Alan W. Braun, Andrew E. Goebel, Robert G. Jones
and Charles D. Storms. 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 six contain the following information with respect to
each Class III Director, and with respect to incumbent Directors in Classes I
and II 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
24, 2005; and the percentage that the shares beneficially owned represent of the
total outstanding shares of the Company as of February 24, 2005. 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 INCUMBENT DIRECTOR NOMINEES
CLASS III DIRECTORS
(TERM EXPIRING 2008)
[ALAN W. BRAUN [ANDREW E. GOEBEL
PHOTO] PHOTO]
ALAN W. BRAUN ANDREW E. GOEBEL
- CHAIRMAN, - FINANCIAL AND
PRESIDENT AND CEO, MANAGEMENT
INDUSTRIAL CONSULTANT
CONTRACTORS, INC. (2003 - present)
(Construction) - PRESIDENT AND COO,
(2004 - present) VECTREN
- CHAIRMAN AND CEO, CORPORATION
INDUSTRIAL (2000 - 2003)
CONTRACTORS, INC. (Utility)
(2002 - 2004) - PRESIDENT AND COO,
- PRESIDENT, SIGCORP, INC.
INDUSTRIAL (2000)
CONTRACTORS, INC. (Utility)
(1999 - 2002) - PRESIDENT AND CEO,
- Age 60 SOUTHERN INDIANA
- Director since GAS & ELECTRIC
1988 COMPANY
(1999)
(Utility)
- Age 57
- Director since
2000
[ROBERT G. JONES [CHARLES D. STORMS
PHOTO] PHOTO]
ROBERT G. JONES CHARLES D. STORMS
- PRESIDENT AND CEO, - CHAIRMAN,
OLD NATIONAL PRESIDENT AND CEO,
BANCORP RED SPOT PAINT &
(2004 - present) VARNISH CO., INC.
- CEO, MCDONALD (1999 - present)
INVESTMENTS, INC., (Manufacturer of
A SUBSIDIARY OF Industrial
KEYCORP Coatings)
(2001 - 2004) - Age 61
(Financial - Director since
Services) 1988
- EXECUTIVE VICE
PRESIDENT, KEYCORP
(1999 - 2001)
(Financial
Services)
- Age 48
- Director since
2004
3
INFORMATION REGARDING DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS
(TERM EXPIRING 2006)
[JOSEPH D. BARNETTE, [LARRY E. DUNIGAN
JR. PHOTO] PHOTO]
JOSEPH D. BARNETTE, LARRY E. DUNIGAN
JR. - CHIEF EXECUTIVE
- PRESIDENT, THE OFFICER, HOLIDAY
SEXTON COMPANIES MANAGEMENT COMPANY
(2002 - present) (1999 - present)
(Apartment (Health Care
Developers/ Services and
Managers) Internet Services)
- CHAIRMAN, - Age 62
BANK ONE, INDIANA, - Director since
N.A. 1982
(1999 - 2002)
(Financial
Services)
- Age 65
- Director since
1/27/2005
[DOUGLAS D. FRENCH [PHELPS L. LAMBERT [MARJORIE Z.
PHOTO] PHOTO] SOYUGENC PHOTO]
DOUGLAS D. FRENCH PHELPS L. LAMBERT MARJORIE Z. SOYUGENC
- FORMER PRESIDENT - MANAGING PARTNER, - EXECUTIVE DIRECTOR
AND CEO, ASCENSION LAMBERT AND AND CEO, WELBORN
HEALTH LAMBERT FOUNDATION, INC.
(2001 - present) (1999 - present) (2004 - present)
(Health Care) (Investments) (Non-Profit
- EXECUTIVE VICE - Age 57 Foundation)
PRESIDENT/COO, - Director since - EXECUTIVE DIRECTOR
ASCENSION HEALTH 1990 AND CEO, WBH
(1999 - 2001) EVANSVILLE, INC.,
- Age 51 WELBORN FOUNDATION,
- Director since INC. AND WELBORN
2002 BAPTIST
FOUNDATION, INC.
(1999 - 2004)
(Non-Profit
Foundation)
- PRESIDENT AND CEO,
WELBORN BAPTIST
HOSPITAL
(1999)
(Health Care)
- Age 64
- Director since
1993
4
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
- FORMER CHAIRMAN - CHAIRMAN, - PRESIDENT, BMH
AND CEO, OLD PRESIDENT AND CEO, FOUNDATION, INC.
NATIONAL BANK, VECTREN (2003 - present)
JASPER, INDIANA CORPORATION (Non-Profit
(AN AFFILIATE OF (2003 - present) Foundation)
THE COMPANY) (Utility) - PRESIDENT AND CEO,
(1999 - present) - CHAIRMAN OF THE ONTARIO
- Age 61 BOARD AND CEO, CORPORATION
- Director since VECTREN CORPORATION (1999 - 2003)
1993 (2000 - 2003) (Diversified
- PRESIDENT AND CEO, Technology/
INDIANA ENERGY Manufacturing
(1999 - 2000) Company)
(Utility) - Age 61
- Age 56 - Director since
- Director since 2000
2002
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 24, 2005, 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
-------------- --------------------- ------------
Joseph D. Barnette, Jr. ........................ 2,000(2) *
Alan W. Braun................................... 228,969(3) *
Thomas F. Clayton............................... 223,071(4) *
Larry E. Dunigan................................ 289,233(5) *
David E. Eckerle................................ 97,874(6) *
Niel C. Ellerbrook.............................. 2,471(7) *
Douglas D. French............................... 948 *
Andrew E. Goebel................................ 9,506(8) *
Michael R. Hinton............................... 258,748(9) *
Robert G. Jones................................. 51,437(10) *
Phelps L. Lambert............................... 237,513(11) *
Daryl D. Moore.................................. 210,859(12) *
John S. Poelker................................. 212,454(13) *
Marjorie Z. Soyugenc............................ 282,513(14) *
Kelly N. Stanley................................ 45,215(15) *
Charles D. Storms............................... 67,910(16) *
Directors and Executive Officers as a Group (21
persons)...................................... 2,664,174 3.9%
-------------------------
* 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 1,000 shares held by Charlene Ann Barnette, Mr. Barnette's
spouse.
(3) Includes 65,697 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.
(4) Includes 14,295 shares held by Susan Clayton, Mr. Clayton's spouse. Also
includes 180,331 shares issuable to Mr. Clayton upon exercise of
outstanding stock options exercisable within 60 days. Also includes 10,500
shares of performance-based restricted stock.
(5) Includes 9,222 shares held by Kevin T. Dunigan Trust, Sharon Dunigan,
trustee; 10,037 shares held by Derek L. Dunigan Trust, Sharon Dunigan,
trustee; 2,480 shares held by Mitchell Ryan Dunigan Trust, Larry Dunigan,
trustee; and 44,344 shares held by Larry E. and Sharon Dunigan.
(6) Includes 22,414 shares held by Luella Eckerle, Mr. Eckerle's spouse. Also
includes 12,155 shares issuable to Mr. Eckerle upon exercise of
outstanding stock options immediately exercisable.
(7) Includes 391 shares held by Karen Ellerbrook, Mr. Ellerbrook's spouse.
(8) Includes 7,058 shares held by Darlene Goebel, Mr. Goebel's spouse.
(9) Includes 11,187 shares held by Debra D. Hinton, Mr. Hinton's spouse. Also
includes 182,261 shares issuable to Mr. Hinton upon exercise of
outstanding stock options exercisable within 60 days. Also includes 28,250
shares of performance-based restricted stock.
(10) Includes 51,250 shares of performance-based restricted stock.
(11) Includes 11,765 shares held by Carol M. Lambert, Mr. Lambert's spouse.
(12) Includes 170,960 shares issuable to Mr. Moore upon exercise of outstanding
stock options exercisable within 60 days. Also includes 12,300 shares of
performance-based restricted stock.
(13) Includes 181,608 shares issuable to Mr. Poelker upon exercise of
outstanding stock options exercisable within 60 days. Also includes 22,300
shares of performance-based restricted stock.
(14) Includes 268,339 shares held by Rahmi Soyugenc, Ms. Soyugenc's spouse.
(15) Includes 223 shares held by Donna M. Stanley, Mr. Stanley's spouse. Also
includes 23,781 shares issuable to Mr. Stanley upon exercise of
outstanding stock options.
(16) Includes 211 shares held by Elizabeth K. Storms, Mr. Storms' spouse.
6
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
---- --- ------------------------------
Robert G. Jones 48 President, Chief Executive Officer, and Director of the
Company since September 2004. CEO of McDonald Investments,
Inc., a subsidiary of Keycorp, from September 2001 to
September 2004, and Executive Vice President of Keycorp from
December 1999 to September 2001.
Caroline J. Ellspermann 37 Executive Vice President of the Company since December 2004,
CEO of Old National Trust Company since October 2004 and
President of Old National Wealth Management since June 2003.
Senior Vice President of the Company and Manager of Old
National Private Client Group from 2001 to June 2003.
Previously, Private Banking Division Manager of Fifth Third
Bank from 1999 to 2001.
Daryl D. Moore 47 Executive Vice President of the Company since January 2001
and Senior Vice President of the Company from 1996 to 2001.
Michael R. Hinton 50 Chairman and CEO of Old National Bank since January 2005.
Senior Executive Vice President and Chief Operating Officer
of the Company since August 2004. President and Chief
Operating Officer of the Company from April 2003 to August
2004, 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 47 Chief Administrative Officer of the Company since January
2005. Executive Vice President of the Company since August
2002 and President and CEO of Old National Service Division
since April 1997.
Jeffrey L. Knight 45 Executive Vice President and Chief Legal Counsel of the
Company since December 2004. Senior Vice President of the
Company from 2001 to 2004. Corporate Secretary of the
Company since 1994 and General Counsel of the Company from
1993 to 2004.
Allen R. Mounts 53 Executive Vice President and Chief Human Resources Officer
of the Company since January 2005. Senior Vice President of
the Company from 2001 to January 2005 and Vice President of
the Company from 1993 to 2001. Director of Human Resources
of the Company from 1993 to January 2005.
Christopher A. Wolking 44 Executive Vice President and Chief Financial Officer of the
Company since January 2005. Senior Vice President of the
Company from 2001 to January 2005 and Vice President of the
Company from 1999 to 2001. Treasurer of the Company from
1999 to January 2005.
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, 2004. All incumbent Directors attended 75% or more of
the aggregate of the total number of 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 2004.
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 and Management
Development Committee ("Compensation Committee"), a Corporate Governance and
Nominating Committee, and a Funds Management Committee.
7
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 2004 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 seven meetings during 2004. The functions of the Audit Committee
are described under "Report of the Audit Committee" on pages 10 through 12. 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 and is also available in print
to any shareholder upon request.
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 and Charles D. Storms. The Corporate Governance and
Nominating Committee met three times in 2004. The functions of the Corporate
Governance and Nominating Committee are described under "Report of the Corporate
Governance and Nominating Committee" on pages 13 through 15. 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 and is also
available in print to any shareholder upon request.
The members of the Compensation Committee are Niel C. Ellerbrook (Chairman),
Larry E. Dunigan and Charles D. Storms. The Compensation Committee met six times
during 2004. The Personnel Committee has been dissolved and the functions of the
Personnel Committee have been assumed by the Compensation Committee. The
functions of the Compensation Committee are described under "Report of the
Compensation Committee on Executive Compensation" on pages 16 through 19. 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 and is also available in
print to any shareholder upon request.
The members of the Funds Management Committee are Phelps L. Lambert
(Chairman), David E. Eckerle and Andrew E. Goebel. The Funds Management
Committee met five times during 2004. 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 outside Directors of the Company receive an annual retainer of $34,000
for serving as Directors. The outside Directors receive $24,000 of the retainer
in cash, while $10,000 of the retainer is paid in Company stock. Directors not
otherwise employed by the Company also receive $1,000 for each Committee meeting
attended and Audit Committee members receive $1,500 for each Audit Committee
meeting attended. The Audit Committee Chairman receives an additional annual
retainer of $7,500 and Directors serving as a Committee Chairman on other
committees receive an additional annual retainer of $2,500. The non-executive
Chairman of the Board receives an additional annual retainer of $25,000. Robert
G. Jones, president and CEO of the Company and the only inside Director on the
Board, receives no compensation for his directorship.
8
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 2004 and for other services
rendered during fiscal year 2004 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 2004 FISCAL 2003
----------- -----------
AUDIT....................................................... $1,005,700 $805,202
AUDIT RELATED............................................... 0 0
TAX......................................................... 103,774 2,763
ALL OTHER................................................... 22,928 10,200
---------- --------
TOTAL....................................................... $1,132,402 $818,165
========== ========
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 on Form 10-Q, (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, 2004 were $1,005,700, of which
an aggregate amount of $643,500 had been billed through December 31, 2004.
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 provided by PricewaterhouseCoopers
LLP 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, 2005, 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.
9
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 early in 2005 and meets the requirements of the Securities and Exchange
Commission ("SEC") and the New York Stock Exchange ("NYSE").
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 are primarily derived from its role
in the general oversight of the financial reporting process. That role includes
the creation and maintenance of a strong internal control environment and a
process of assessing the risk of fraud in the reporting process. The 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; pre-approving all auditing services and
permissible non-audit 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.
The Audit Committee also has responsibility for the general oversight of the
Company's compliance with banking laws and regulations.
2004 WORK OF THE AUDIT COMMITTEE
In fulfilling its oversight responsibilities in 2004, the Audit Committee
continued to be 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
10
met both jointly and separately with representatives of Old National Bank's
primary federal regulator and management and with the independent accountants to
ensure the accuracy of the Company's loan loss reserve methodology and loan loss
provision. The Audit Committee also monitored management's progress in
implementation of the modifications undertaken by the Company to its credit
approval processes in 2003 -- 2004 in order to address the high level of loan
losses incurred during those years.
In 2004, the Audit Committee was also involved in monitoring the
Ethicspoint(R) reporting system which was acquired and implemented in 2003 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.
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
included the intensive involvement of the Audit Department of the Company,
outside experts and consultants engaged by the Company and the Company's
independent accountants. The overall level of costs incurred in 2004 to comply
with Section 404, excluding the substantial internal resources required, was in
excess of $700,000.
The Audit Committee, in its designated role as the committee of the Board of
Directors assigned the responsibility for the effective oversight of the
Company's compliance with banking laws and regulations, met regularly with the
Company's Chief Compliance Officer and other management personnel in 2004 to
review management's progress in improving the Company's compliance capabilities,
practices and processes. The Company has, as have most other industry
participants, experienced both a significant increase in the duties required of
the Company to detect and report suspicious transactions by its customers and a
heightened level of regulatory scrutiny by regulators with respect to the myriad
of rules and regulations enforced by them. In order to address the greater
requirements and expectations imposed upon the Company, a significant increase
in compliance personnel was necessary in 2004, including the addition of
approximately 40 new compliance positions, the hiring of an experienced senior
executive as the Company's Chief Compliance Officer and the revision of the
Company's compliance policies, processes and procedures. The Committee also met
with representatives of the Company's primary regulatory agency to review their
assessment of the Company's compliance with the laws and regulations
administered by them.
REVIEW WITH MANAGEMENT AND INDEPENDENT ACCOUNTANTS
The Audit Committee has reviewed and discussed the audited financial
statements for the year ended December 31, 2004, 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.
The Audit Committee periodically reviewed with the independent accountants
their assessment of the progress being made by the Company and by the
independent accountants in achieving the challenging schedule necessary to
comply with the internal control certification and attestation requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, by the compliance and reporting
date of December 31, 2004.
The Audit Committee 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 its internal auditors and the
independent accountants, with and without management present, to discuss the
results of their examination and their evaluations of internal controls.
Additionally, the Audit Committee reviewed and
---------------
* The Company's Code of Business Conduct and Ethics is available under the
Corporate Governance link on the Company's website at www.oldnational.com and
is also available in print to any shareholder upon request.
11
discussed 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
Independence Standards Board Standard No. 1. The Audit Committee also
administered the Company's policy regarding engagement of independent
accountants to provide non-audit 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
In accordance with Section 407 of the Sarbanes-Oxley Act of 2002, the Board
of Directors of the Company determined that Andrew E. Goebel is an Audit
Committee "Financial Expert." Mr. Goebel is independent as that term is used in
Schedule 14A under the Securities Exchange Act of 1934.
REAPPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
The Audit Committee has reappointed PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal year 2005, subject to ratification
by the shareholders of the Company at the 2005 Annual Meeting.
ANNUAL COMMITTEE REVIEW OF CHARTER AND PERFORMANCE EVALUATION
As required by the Audit Committee's Charter, in early 2005 the Audit
Committee reviewed the Charter and determined that several modifications were
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 Committee.
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 Company's Annual Report on Form 10-K for the year
ended December 31, 2004, filed with the SEC.
Submitted by,
Members of the Audit Committee
Andrew E. Goebel, Chairman
Larry E. Dunigan
Phelps L. Lambert
Marjorie Z. Soyugenc
Kelly N. Stanley
12
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.
Directors are expected to have sound judgment, borne of management or policy
making experience that demonstrates an ability to function effectively in an
oversight role. In addition, directors should have a general appreciation
regarding major issues facing public companies of a size and operational scope
similar to that of the Company. The issues would include contemporary governance
concerns, regulatory obligations of a financial holding company, a national and
public company and strategic business planning and basic concepts of corporate
finance.
---------------
* The Company's Corporate Governance Guidelines are available under the
Corporate Governance link on the Company's website at www.oldnational.com and
are also available in print to any shareholder upon request.
13
2004 WORK OF THE CORPORATE GOVERNANCE COMMITTEE
The Corporate Governance Committee achieved several accomplishments in 2004.
With the departure of the former Chairman, James A. Risinger, on March 31, 2004,
the Corporate Governance Committee established a CEO Search Sub-Committee to
engage in a search for a new CEO for the Company. The members of the CEO Search
Sub-Committee included Larry Dunigan, David Eckerle, Niel Ellerbrook and Charles
Storms (Chairman).
In August of 2004, the CEO Search Sub-Committee completed its work and
recommended the appointment of Robert G. Jones as President and CEO of the
Company. The Corporate Governance Committee accepted the recommendation of the
CEO Search Sub-Committee and recommended Robert G. Jones to the Board as the new
President and CEO of the Company. The Board appointed Robert G. Jones as
President and CEO on August 17, 2004.
The Corporate Governance Committee also approved the appointment of Larry E.
Dunigan as non-executive Chairman of the Company on August 17, 2004. Mr. Dunigan
had been elected interim Chairman of the Company by the Board in February 2004,
and Mr. Dunigan served in that capacity until being elected as the non-executive
Chairman of the Board on August 17, 2004. Mr. Dunigan, as the non-executive
Chairman of the Company, serves as the presiding director of the executive
session meetings of the non-management Directors of the Board.
CONTACTING THE BOARD OF DIRECTORS
Any shareholder or other interested party who desires to contact Old
National's non-executive Chairman 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 47705-0718. Communications
received are distributed to the non-executive Chairman 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.
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 President and CEO, Robert G. Jones, 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 as set forth
in Appendix I.
ANNUAL COMMITTEE REVIEW OF CHARTER AND PERFORMANCE EVALUATION
As required by the Corporate Governance Committee's Charter, in early 2005
the Corporate Governance Committee reviewed its Charter and made minor
modifications to it. Also, as required by the Corporate Governance Committee's
Charter, the Corporate Governance Committee conducted an annual performance
evaluation.
14
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 2005 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,
Members of the Corporate Governance and Nominating Committee
Larry E. Dunigan, Chairman
Niel C. Ellerbrook
Douglas D. French
Phelps L. Lambert
Marjorie Z. Soyugenc
Kelly N. Stanley
Charles D. Storms
15
REPORT OF THE COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is currently composed
of three 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 the Company on executive compensation matters.
INDEPENDENCE OF THE COMPENSATION COMMITTEE MEMBERS
All three 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 approve and evaluate
the Company's compensation and benefit programs and to ensure the
competitiveness of these programs. The Compensation Committee is responsible for
annually reviewing and approving corporate goals and objectives relevant to CEO
compensation, coordinating the evaluation of the CEO's performance with the
non-executive Chairman 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 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 exercising 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 2005 the
Compensation Committee reviewed the Charter and made minor modifications to it.
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;
- 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
16
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 271,622 stock option grants to 144 key officers, 49,298 stock
option grants to 58 sales producers and 274,521 performance-based restricted
stock grants to key officers of the Company in 2004. The equity-based
compensation plans assure that key 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 key 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 Chief Executive
Officer (hereinafter, the "CEO") and the Company's next four highest paid
Executive Officers. 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 compiled by Mercer Human Resources
Consulting. The Company's peer group consists of reasonably comparable regional
bank holding companies and other Indiana-based banks. 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.
From survey data, salary ranges are established each year for the CEO and
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 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 2004,
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. In 2004, the Company based the STIP goals on three
performance factors for covered executives, two of which related to Project
ASCEND, a company-wide program aimed at improving both efficiency and
profitability. The three factors for covered executives include earnings per
share, Project ASCEND earnings enhancement projects approved and Project ASCEND
2004 earnings enhancement projects completed. For 2004, the earnings per share
thresholds established by the Compensation Committee were not met, but Project
ASCEND earnings enhancement targets were exceeded and, accordingly, STIP payouts
were made to eligible participants of the STIP.
The minimum incentive award that an employee can earn under the STIP is 5%
of the participant's base salary. The award level is based upon the Company's
and the individual participant's performance. The
17
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 was 32.5% 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
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 and
performance-based restricted stock afford a desirable long-term compensation
method because they closely align the interests of management with those of
shareholders. One hundred forty-four key officers, including those listed in the
Summary Compensation Table, participate in the Plan. During 2004, the
Compensation Committee granted 320,920 stock options and 274,521
performance-based restricted stock grants to certain key officers. In
determining the equity grants 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 2004 COMPENSATION FOR THE CEO
Mr. James A. Risinger served as Chairman and Chief Executive Officer from
January 1, 1998 to March 31, 2004. The Compensation Committee used the executive
compensation practices described above to determine Mr. Risinger's fiscal year
2004 base salary.
Mr. Robert G. Jones was hired as President and CEO on September 7, 2004. In
setting both the cash-based and equity-based elements of Mr. Jones'
compensation, the Compensation Committee made an overall assessment of Mr.
Jones' leadership in establishing the Company's long-term and short-term
strategic, operational and business goals. Mr. Jones' 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 award to align Mr. Jones' compensation with the performance
of the Company. The resulting total compensation package was within a
competitive range 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 the fiscal year 2004, the specific recommendation for Mr. Jones
positioned his target total compensation at $800,000 annualized: his annual base
salary was set at $600,000 with a $267,000 bonus opportunity under the STIP. Mr.
Jones was paid $193,852 for the fiscal year 2004, which represents a
proportionate share of his annual salary. The STIP performance objectives for
Mr. Jones were based on the Company's earnings per share and Project ASCEND
earnings enhancement goals. Mr. Jones' bonus opportunity provided for a
guaranteed bonus of $200,000.
In determining the equity grant for Mr. Jones, the Compensation Committee
evaluated his total direct compensation compared to CEOs of comparable
companies, and determined that an award of 26,250
18
"performance-based" restricted stock shares of Company stock was appropriate.
Mr. Jones was also awarded a non-qualified stock option to purchase 26,250
shares of the Company common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the Compensation Committee is comprised of three
non-employee directors: Messrs. Ellerbrook, Dunigan and Storms. No member of the
Compensation Committee is or was formerly an officer or employee of the Company.
No executive officer of the Company currently serves or in the past year has
served as a member of the compensation committee or board of directors of
another company of which an executive officer serves on the Compensation
Committee of the Company. Nor does any executive officer of the Company serve
and in the past year no executive officer has served as a member of the
compensation committee of another company of which an executive officer serves
as a director of the Company.
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:
Members of the Compensation and Management Development Committee
Niel C. Ellerbrook, Chairman
Larry E. Dunigan
Charles D. Storms
19
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following Summary Compensation Table shows the annual compensation paid
by the Company to its Chief Executive Officer for 2004 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, 2004 (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
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARD(S)
----------------------------------------- --------------------------------------
(C)
NUMBER OF
(B) SECURITIES (D)
OTHER RESTRICTED UNDERLYING ALL
BASE (A) ANNUAL STOCK OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS GRANTED COMPENSATION
--------------------------- ---- -------- -------- ------------ ---------- ---------- ------------
Robert G. Jones*............... 2004 $193,852 $200,000 $ 7,142 $629,737 26,250 $ 0
President and 2003 0 0 0 0 0 0
Chief Executive Officer 2002 0 0 0 0 0 0
James A. Risinger**............ 2004 $185,008 $ 0 $14,770 $681,471 0 $2,243,476
Former Chairman of the Board 2003 691,119 0 5,914 0 119,536 85,001
and Chief Executive Officer 2002 625,019 325,197 6,414 0 219,398 85,031
Michael R. Hinton.............. 2004 $406,775 $186,504 $24,915 $352,485 15,750 $ 45,705
Senior Executive Vice President 2003 375,102 0 3,658 0 136,500 42,906
and Chief Operating Officer 2002 350,002 132,441 3,527 0 91,508 42,906
Thomas F. Clayton.............. 2004 $377,379 $141,419 $15,888 $234,990 10,500 $ 40,861
Executive Vice President 2003 352,102 0 7,567 0 115,500 41,736
Administration & Operations 2002 337,002 127,521 6,920 0 91,508 41,736
Daryl R. Moore................. 2004 $303,868 $101,115 $33,399 $140,994 6,300 $ 32,438
Executive Vice President 2003 286,118 0 7,261 0 79,800 33,933
Chief Credit Officer 2002 275,018 104,067 7,262 0 91,508 33,933
John S. Poelker................ 2004 $372,413 $139,411 $18,939 $234,990 9,450 $ 35,836
Executive Vice President 2003 350,102 0 3,973 0 115,500 31,952
Chief Financial Officer 2002 332,010 125,632 3,447 0 91,508 31,952
---------------
(a) These amounts represent bonuses payable pursuant to the Company's Short Term
Incentive Plan (STIP).
(b) To continue its objective of focusing the key officers on creation of
shareholder value, the Compensation Committee approved a new 3-year grant of
performance-based restricted stock awards to key officers in July 2004 and
to Robert Jones (CEO) in September 2004. The 2004 grants could be earned on
December 31, 2006 based on Old National's results for three performance
factors to a comparator financial peer group. The performance factors
include (1) Relative Total Shareholder Return (stock price appreciation plus
dividends paid) of the Common Stock measured, (2) Earnings Per Share (EPS)
Growth, and (3) Book Value Per Share (BVPS) Growth. If the weighted average
results are at or above the 50th percentile relative to the peer group as
measured at the end of fiscal year 2006, the rights in the performance-based
restricted stock grants will vest on March 31, 2007. If the weighted average
results are below the 50th percentile relative to the peer group as measured
at the end of fiscal year 2006, then a portion or all of the shares may be
forfeited. In the event of a "change of control", the restrictions will
lapse for all performance-based restricted stock. The Company's practice is
to pay dividends on restricted shares directly to the officers awarded the
shares.
(c) The options listed have been adjusted to reflect stock dividends.
(d) All Other Compensation includes the following for Messrs. Hinton, Clayton,
Moore and Poelker for 2004: (i) Company contribution to the Company's
Employee Stock Ownership Plan of $18,450, $18,450, $18,450 and $16,400, for
each Named Executive Officer, respectively; and (ii) Company contribution to
the Supplemental Deferred Compensation Plan of $27,255, $22,411, $13,988 and
$19,436, for each Named Executive Officer, respectively. All Other
Compensation for Mr. Risinger represents the amount paid in connection with
his retirement at March 31, 2004.
* Mr. Jones became President and Chief Executive Officer effective September
7, 2004.
** Mr. Risinger retired as Chairman of the Board and Chief Executive Officer on
March 31, 2004.
20
STOCK OPTION GRANTS
The following table contains information concerning the stock option grants
made to each of the Named Executive Officers during the fiscal year ended
December 31, 2004.
INDIVIDUAL GRANT GRANT DATE VALUE
----------------------------------------------- ----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION GRANT DATE
NAME GRANTED IN 2004(1) PRICE(2) DATE PRESENT VALUE(3)
---- ---------- ---------- -------- ---------- ----------------
Robert G. Jones.................... 26,250 8.2% $23.99 9/7/14 $126,233.63
James A. Risinger.................. 0 -- -- -- --
Michael R. Hinton.................. 15,750 4.9% $20.43 1/31/14 $ 61,870.73
Thomas F. Clayton.................. 10,500 3.3% $20.43 1/31/14 $ 41,247.15
Daryl D. Moore..................... 6,300 2.0% $20.43 1/31/14 $ 24,748.29
John S. Poelker.................... 9,450 2.9% $20.43 1/31/14 $ 37,122.44
---------------
(1) Based on an aggregate of 320,920 option shares granted in fiscal year 2004.
(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 vested 100% on December 31, 2004 for Messrs. Hinton,
Clayton, Moore and Poelker. Mr. Jones' options will be 100% vested on
September 7, 2005, 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 2004, with respect to each of the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Robert G. Jones...... -- -- 0 26,650 $ 0 $ 16,800
James A. Risinger.... -- -- 603,044 0 $2,150,651 $ 0
Michael R. Hinton.... -- -- 201,595 155,535 $ 700,549 $618,688
Thomas F. Clayton.... -- -- 190,832 138,998 $ 656,725 $553,365
Daryl D. Moore....... -- -- 177,261 110,884 $ 602,068 $442,316
John S. Poelker...... -- -- 191,058 138,998 $ 656,053 $553,365
---------------
(1) Based on the fair market value of the Company's Common Stock at fiscal year
end ($24.63 per share), and such value is equal to the closing price as
reported by the NYSE at December 31, 2004, 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.
21
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, 2004 prohibited the distribution of
benefits from the Retirement Plan in excess of $165,000 per year expressed
as a straight life annuity. It also prohibited compensation in excess of
$205,000 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 10
years of service, 1.65% for the next 10 years of service, and 1.95% for the next
15 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.
2004 base salary figures for the CEO and the other Names Executive Officers
of the Company are set forth in the Summary Compensation Table on page 20. 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, 2004, Mr. Hinton had 25 years of vested service; Mr.
Clayton, 17 years; and Mr. Moore, 26 years. Messrs. Jones and Poelker are not
accruing benefits under this Plan.
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 defined benefit pension plans may not
exceed $165,000), 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, 2005, the Company entered into new change of control and
severance agreements with Robert G. Jones, Michael R. Hinton, Thomas F. Clayton,
and Daryl D. Moore. On January 1, 2004, the Company entered into a change of
control and severance agreement with John S. Poelker. Pursuant to the severance
22
agreements, the Company shall provide the Named Executive Officers with the
Benefits, as defined below, upon any termination of employment for any reason
except termination for cause, disability, voluntary retirement, resignation, in
connection with or following a Change of Control, as defined in the change in
control agreements, or the death of the Named Executive Officer. In addition,
the Company should provide the Benefits, if during the term of the severance
agreement the Named Executive Officer terminates the agreement no later than 90
days after the happening of one or more of the following events: (i) the
assignment of the Named Executive Officer to any duties materially inconsistent
with his positions, duties, responsibilities, or status with the Company as of
the date of the agreement; (ii) a reduction by the Company in the compensation
or benefits of the Named Executive Officer in effect as of the date of the
agreement; or (iii) a requirement the Named Executive Officer be based anywhere
other than within 50 miles from his personal residence.
The "Benefits" mentioned above include a lump sum single payment equal to
the Named Executive Officer's Week of Pay, as defined below, multiplied by the
greater of 52 or two times his number of years of service (Mr. Jones' Severance
Agreement defines "Benefits" as a lump sum single payment equal to his Week of
Pay multiplied by 104). "Week of Pay" is the annual base salary then in effect,
plus the targeted cash incentive the Named Executive Officer would have been
eligible to receive in the year in which the termination occurs divided by 52.
The change of control agreements provide the Named Executive Officers with a
single lump sum payment equal to the Named Executive Officer's base salary and
benefits accrued through the last day of employment plus a lump sum single cash
payment equal to 2.999 times the Base Amount (Mr. Moore's Change of Control
Agreement provides for 2.0 times the Base Amount), as defined in Section 280G of
the Internal Revenue Code of 1986, upon any termination of the Named Executive
Officer's employment by the Company during the two year period following the
first change in control, unless the termination is for cause, disability of the
Named Executive Officer, voluntary retirement or death of the Named Executive
Officer. The lump sum payments described above are also provided to the Named
Executive Officer if he terminates his employment during the two year period
following a change in control after one of the following events: (i) the
assignment of the Named Executive Officer to any duties materially inconsistent
with his positions, duties, responsibilities, or status with the Company
immediately prior to the change in control; (ii) a reduction by the Company in
the compensation or benefits of the Named Executive Officer in effect
immediately prior to the change in control; (iii) a requirement the Named
Executive Officer be based anywhere other than within 50 miles of the location
at which the Named Executive Officer was based immediately prior to the change
in control; (iv) any purported termination of the Named Executive Officer's
employment for cause or for disability without grounds; (v) any failure of the
Company to obtain the assumption of the obligation to perform under the change
of control agreement by any successor; or (vi) any material breach by the
Company of this or any other material written agreement between the Company and
the Named Executive Officer.
23
SHAREHOLDER RETURN PERFORMANCE COMPARISONS
The Company is required to include in this proxy statement a line graph
comparing cumulative five-year total shareholder returns, assuming reinvestment
of dividends, for the Company's common stock to cumulative total returns of a
broad-based equity market index and a published industry index. During 2004, the
Company moved from the Russell 1000 Index to the Russell 2000 Index. For
comparative purposes, both the Russell 2000 and the Russell 1000 Indices are
reflected in the stock performance graph.
(PERFORMANCE GRAPH)
OLD NATIONAL NYSE FINANCIAL
BANCORP RUSSELL 2000 INDEX INDEX RUSSELL 1000 INDEX
------------ ------------------ -------------- ------------------
12/31/99 100.00 100.00 100.00 100.00
12/31/00 98.71 95.80 125.23 91.16
12/31/01 89.81 96.78 114.93 78.77
12/31/02 93.44 75.90 98.81 60.70
12/31/03 95.38 110.33 126.81 77.42
12/31/04 116.96 129.09 135.53 84.77
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, 1999, in common stock of each of the Company, the
Russell 2000 Index, the NYSE Financial Index, and the Russell 1000 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 2004, the Company paid $19,277,731.93 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.
24
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, 2005. 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, 2005. 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.
ITEM 3. APPROVAL OF THE OLD NATIONAL BANCORP
SHORT-TERM INCENTIVE COMPENSATION PLAN
The shareholders of the Company are being asked to approve the Old National
Bancorp Short-Term Incentive Compensation Plan ("Plan"), a copy of which is
attached to this proxy statement as Appendix II. The Plan is designed to advance
the interests of Old National Bancorp and its subsidiaries (collectively, the
"Company") by providing an annual incentive bonus to be paid to certain
employees of the Company based on the achievement of pre-established
quantitative performance goals. The Plan is a performance-based compensation
plan as defined in Internal Revenue Code Section 162(m) of the Internal Revenue
Service of 1986, as amended ("Code"), and payments under the Plan are intended
to qualify for tax deductibility under Section 162(m). Under Section 162(m) of
the Code, the Company may not deduct more than $1 million per year for
compensation paid to the CEO and the four other most highly compensated officers
of the Company. An exclusion from this deduction limitation is available for
compensation that satisfies the shareholder approval and other requirements
provided in Section 162(m) of the Code for qualified performance-based
compensation. The purpose of submitting the Plan to the shareholders for
approval is to qualify the annual incentive bonus to be paid to each
participating executive officer as performance-based compensation that will be
excluded from the limit described above on tax deductible compensation under
Section 162(m) of the Code. Currently, no employee of the Company is expected to
have compensation in 2005 that will exceed the $1 million limit. Subject to
shareholder approval, the Board adopted the Plan on January 27, 2005.
HOW IS THE PLAN ADMINISTERED?
The Plan is administered by the Compensation Committee, which is made up
solely of independent directors. The Compensation Committee has the authority to
designate participants under the Plan, establish performance goals and
objectives and determine the amount and timing of awards. Within the first 90
days of each calendar year, the Compensation Committee will establish the
performance goals and objectives governing the Plan as well as the method of
calculating the amount of the awards under the Plan. These performance goals
will be based on any of the following factors, alone or in combination, as the
Compensation Committee deems appropriate: (i) return on assets; (ii) return on
equity; (iii) total shareholder return; (iv) operating income; (v) earnings per
share; (vi) total risk adjusted revenue; (vii) credit quality; (viii)
productivity; (ix) customer satisfaction; (x) customer attention; (xi) associate
satisfaction; or (xii) such other measures as the Compensation Committee deems
appropriate. Performance goals may be measured on an absolute basis or relative
to a group of peer companies selected by the Compensation Committee, relative to
internal goals or relative to levels attained in prior years. The Compensation
Committee shall have discretion to adjust performance goals as specified under
the Plan and to exclude certain factors, including the effect of nonrecurring
transactions and charges or changes in accounting standards. For each year that
the Plan is in effect, the Compensation Committee may use one or more of the
permitted performance goals and may change the performance goals and targets
from year to year.
25
IMPORTANT FACTS ABOUT AWARDS
Under the Plan, each participant will be eligible to receive an incentive
bonus based on the achievement of the pre-established goals set by the
Compensation Committee. If a participant terminates employment before the last
day of the year by reason of death, disability or retirement, a payout based on
the time of employment during the year shall be distributed. Participants
employed on the last day of the year, but not for the entire year, shall receive
a payout pro-rated for that part of the year for which they were participants if
the participant is deceased at the time of an award payment, the payment shall
be made to the recipient's designated representative.
The Compensation Committee may amend, suspend or terminate the Plan at any
time in its sole and absolute discretion. Any amendment or termination of the
Plan, however, shall not affect the right of a participant to receive any earned
but unpaid incentive bonus. The Compensation Committee may amend the Plan
without shareholder approval, unless such approval is necessary to comply with
applicable laws, including provisions of the Securities Exchange Act of 1934 or
the Code.
Nothing in the Plan precludes the Company from making additional payments or
special awards to plan participants outside of the Plan that may or may not
qualify as "performance-based" compensation under Section 162(m) of the Code,
provided that such payment or award does not affect the qualification of any
incentive compensation payable under the Plan as "performance-based"
compensation.
TAX CONSEQUENCES FOR AWARDS
Awards shall be paid in cash within three months of the fiscal year-end or
as soon as practicable thereafter. Federal, state and local taxes will be
withheld as appropriate.
It is the intent of the Company that awards made pursuant to the Plan
constitute "qualified performance-based compensation" satisfying the
requirements of Section 162(m) of the Code. Any bonus to be paid to each
participating executive officer as performance-based compensation will be
excluded from the limit described above on tax deductible compensation under
Section 162(m) of the Code.
BENEFITS UNDER THE PLAN BASED UPON 2004 AWARDS
The payouts that would have been paid to the Named Executive Officers of the
Company for the last fiscal year if the Plan had been in place are not
determinable at this time.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
FOR THE 2006 ANNUAL MEETING
Proposals submitted by shareholders under Rule 14a-8 of the SEC to be
presented at the 2006 Annual Meeting of Shareholders must be received by the
Company at its principal executive office no later than November 15, 2005, 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 at P.O. Box 718, Evansville, Indiana
47705-0718. If notice of any other shareholder proposal intended to be presented
at the 2006 Annual Meeting of Shareholders is not received by the Company on or
before December 30, 2005, 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 13 through 15.
26
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.
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, 2004. ADDRESS
ALL REQUESTS TO:
CANDICE JENKINS, SENIOR 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 10%
of the Company common stock 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-10% owners, the
Company believes that all required Section 16(a) filings for fiscal year 2004
were timely made.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters for
action by shareholders at the 2005 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.
No solicitations will be made by specially engaged employees of the Company or
other paid solicitors.
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.
In an effort to reduce printing costs and postage fees, the Company has
adopted a practice whereby shareholders who have the same address and last name
and who do not participate in electronic delivery of
27
proxy materials will receive only one copy of this proxy statement and the 2004
annual report unless one or more of these shareholders notifies the Company that
they wish to receive individual copies of these materials. The Company will
deliver promptly upon written or oral request a separate copy of this proxy
statement and its 2004 annual report to any shareholder at a shared address to
which a single copy of those materials was sent. If a shareholder shares an
address with another shareholder and received only one copy of this proxy
statement and the annual report this year but would like to receive a separate
copy of these materials in the future, or if a shareholder received multiple
copes of this proxy statement and the 2004 annual report but would like to
receive a single copy of the Company's proxy statement and annual report in the
future, please contact the Company's Shareholder Services Department by phone at
812-464-1296 or 1-800-677-1749, by mail at P.O. Box 929, Evansville, Indiana
47706-0929, or via email at shareholderservices@oldnational.com.
28
APPENDIX I
DIRECTOR INDEPENDENCE STANDARDS
The Board will have a majority of Directors who meet the criteria for
independence required by Section 303A.02 of the New York Stock Exchange ("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 (directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company). A material relationship
is a relationship that the Board determines, after a consideration of all
relevant facts and circumstances, compromises the Director's independence from
management. The Board will consider the issue not merely from the standpoint of
the Director, but also from that of persons or organizations with which the
director has an affiliation. The Board acknowledges that it is not possible to
anticipate, or explicitly provide for, all circumstances that might signal
potential conflicts of interest, or that might bear on the materiality of a
director's relationship with the Company. Therefore, determining independence
must be accomplished on a case-by-case basis through an in-depth analysis of
each Director, the members of his or her immediate family and all of his or her
relevant affiliations with the Company, subject to the requirements of
applicable laws and regulations and the listing standards of the NYSE set forth
below.
In accordance with Section 303A.02 of the NYSE Listed Company Manual, a
Director will automatically be deemed not to be "independent" if the Director
meets any of the following:
a. is currently, or has been within the last three (3) years, an employee of
the Company or any of its affiliates, or has an immediate family member who
has been, within the last three (3) years, an executive officer of the
Company.
b. does receive, or has an immediate family member who receives, or has
received during any twelve-month period within the past three (3) 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).
c. is or has been affiliated with or employed by, or has an immediate family
member who is affiliated with or employed in a professional capacity by,
within the last three (3) years, any (present or former) auditor of the
Company.
d. is an executive officer or an employee, or has an immediate family member
who is an executive officer, of a company that has made payments to, or
received payments from, the Company for property or services in an amount
which, in any of the last three (3) fiscal years, exceeds the greater of $1
million, or 2% of such other company's consolidated gross revenues.
e. is employed, or has an immediate family member who is employed, within the
last three (3) 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, "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.
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
29
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.
30
APPENDIX II
OLD NATIONAL BANCORP
SHORT-TERM INCENTIVE COMPENSATION PLAN
(EFFECTIVE AS OF JANUARY 1, 2005)
SECTION 1. PURPOSE
The purpose of the Old National Bancorp Short-term Incentive Compensation
Plan ("Plan") is to advance the interests of Old National Bancorp and its
subsidiaries (collectively, the "Company") by providing an annual incentive
bonus to be paid to certain employees of the Company based on the achievement of
pre-established quantitative performance goals. The Plan is a performance-based
compensation plan as defined in Internal Revenue Code Section 162(m) of the
Internal Revenue Service of 1986 as amended ("Code") and payments under the Plan
are intended to qualify for tax deductibility under Section 162(m).
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation and Management
Development Committee ("Committee") of the Board of Directors of the Company
("Board"), which is composed solely of two (2) or more members of the Board that
are outside directors, as that term is defined in Section 162(m) of the Code or
regulations promulgated thereunder. The Committee shall have the authority to
grant awards under the Plan to eligible persons specified in Section 3.1 below.
Except as limited by the express provisions of the Plan or by resolutions
adopted by the Board, the Committee also shall have the authority and discretion
to interpret the Plan, to establish and revise rules and regulations relating to
the Plan, and to make any other determinations that it believes necessary or
advisable for administration of the Plan.
SECTION 3. PERFORMANCE AWARDS
3.1 Eligible Participants
This Plan is applicable to any salaried employee of the Company, or any of
its subsidiaries, who is selected for participation in the Plan by the Committee
("Eligible Participants").
3.2. Award Criteria
Prior to March 31 of each year for which an award ("Performance Award") is
payable hereunder, the Committee shall establish the performance factors
("Performance Measures") applicable to the award for that year and the objective
criteria pursuant to which the bonus for that year is to be payable
("Performance Targets"). The Committee must also establish prior to March 31 of
each year for which an Performance Award is payable, an objective formula for
computing the Performance Award based on the Performance Measures and
Performance Targets, as determined by the Committee. The Committee shall have
sole discretion to determine the Company Performance Measures applicable to the
Performance Award, and the method of Performance Award calculation. Performance
Measures may be based on any of the following factors, alone or in combination,
as the Committee deems appropriate: (i) return on assets; (ii) return on equity;
(iii) total shareholder return; (iv) operating income; (v) earnings per share;
(vi) total risk adjusted revenue; (vii) credit quality; (viii) productivity;
(ix) customer satisfaction; (x) customer attention; (xi) associate satisfaction;
or (xii) such other measures as the Committee deems appropriate.
The Committee shall have the sole discretion to determine and establish more
stringent Performance Measures for senior management of the Company including,
but not limited to, the Company's performance and/or ranking as compared to the
Company's peer group, as defined by the Committee.
The Committee may establish a minimum level of performance in order for
Performance Awards to be paid under the Plan. In addition, Performance Targets
may include a maximum and target level of performance with the size of
Performance Awards based on the level attained. Once established, Performance
Targets and
31
Performance Measures shall not be changed during the Plan year defined as the
fiscal year of the Company ("Performance Period"); provided, however, that the
Committee may eliminate or decrease the amount of a Performance Award otherwise
payable to a participant.
3.3 Payment of Awards
As soon as practicable after the Company's audited financial statements are
available for the Performance Period in which the incentive compensation will be
paid, the Committee shall determine the Company's performance in relation to the
Performance Targets for that Performance Period. In performing such evaluation,
the Committee is authorized to make adjustments in the method of calculating
attainment of performance objectives as follows (i) to exclude the dilutive
effects of acquisitions or joint ventures; (ii) to assume that any business
divested by the Company achieved performance objectives at targeted levels
during the balance of a Performance Period following such divestiture; (iii) to
exclude restructuring and/or other nonrecurring charges; (iv) to exclude the
effects of changes to generally accepted accounting standards required by the
Financial Accounting Standards Board; (v) to exclude the effects to any
statutory adjustments to corporate tax; (vi) to exclude the impact of any
"extraordinary items" as determined under generally accepted accounting
principles; (vii) to exclude the effect of any change in the outstanding shares
of common stock of the Company by reason of any stock dividend or split, stock
repurchase, reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other similar corporate change, or any
distributions to common shareholders other than regular cash dividends; and
(viii) to exclude any other unusual, non-recurring gain or loss or other
extraordinary item. The Committee, in making the discretionary adjustments
described herein, may not exercise such discretion if the result of the same is
to increase the amount of compensation payable that would otherwise be due upon
the attainment of the Performance Targets for that Performance Period. The
Committee shall certify in writing the extent to which Performance Targets were
satisfied.
Performance Awards shall be paid in cash within three months of the fiscal
year or as soon as practicable thereafter. Federal, state and local taxes will
be withheld as appropriate.
3.4 Termination of Employment
To receive a Performance Award, the participant must be employed by the
Company on the last day of the fiscal year. If a participant terminates
employment before such date by reason of death, disability or retirement, a
payout based on the period of employment during the year may be distributed if
approved by the Chief Executive Officer. Participants employed on the last day
of the year, but not for the entire year, shall receive a payout prorated for
that part of the year for which they were participants. If the participant is
deceased at the time of Performance Award payment, the payment shall be made to
the recipient's designated representative.
SECTION 4. TERM
The Plan is effective as of January 1, 2005, subject to the approval by the
Company's shareholders at the Company's 2005 Annual Meeting of Shareholders, and
shall remain in effect until such time as it shall be terminated by the Board of
Directors of the Company. Performance Awards may not be paid prior to
shareholder approval of the Plan.
SECTION 5. MISCELLANEOUS
5.1 Amendment and Termination
The Committee may amend, suspend or terminate the Plan at any time in its
sole and absolute discretion. Any amendment or termination of the Plan, however,
shall not affect the right of a participant to receive any earned but unpaid
Performance Award. The Committee may amend the Plan without shareholder
approval, unless such approval is necessary to comply with applicable laws,
including provisions of the Securities Exchange Act of 1934 or the Code.
However, termination shall not affect any awards previously granted under the
Plan.
32
5.2 Section 162(m) Compliance
It is the intent of the Company that awards made pursuant to the Plan
constitute "qualified performance-based compensation" satisfying the
requirements of Section 162(m) of the Code. Accordingly, the Plan shall be
interpreted in a manner consistent with 162(m) of the Code. If any provision of
the Plan is intended to but does not comply with, or is inconsistent with, the
requirements of Section 162(m) of the Code, such provision shall be construed or
deemed amended to the extent necessary to conform to and comply with, Section
162(m) of the Code.
Nothing in this Plan precludes the Company from making additional payments
or special awards to Eligible Participants outside of the Plan that may or may
not qualify as "performance-based" compensation under Section 162(m), provided
that such payment or award does not affect the qualification of any incentive
compensation payable under the Plan as "performance-based" compensation.
5.3 Employment Rights
No provision of the Plan nor any action taken by the Committee or the
Company pursuant to the Plan shall give or be construed as giving any Eligible
Participant any right to be retained in the employ of the Company or affect or
limit the right of the Company to terminate such employment.
5.4 No Limit on Other Awards
Nothing contained in this Plan shall prohibit the Company or any of its
subsidiaries from establishing other special awards or incentive compensation
plans providing for the payment of incentive compensation to employees of the
Company and its subsidiaries, including any participants.
5.5 Prohibited or Unenforceable Provisions
Any provision of the Plan that is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of the Plan.
5.6 Governing Law
The Plan and all rights and Performance Awards hereunder shall be construed
in accordance with and governed by the laws of the State of Indiana.
33
ADMISSION TICKET
PLEASE BRING THIS TICKET TO THE ANNUAL MEETING.
IT WILL EXPEDITE YOUR ADMITTANCE WHEN PRESENTED UPON YOUR ARRIVAL.
OLD NATIONAL BANCORP
2005 ANNUAL MEETING OF SHAREHOLDERS
THURSDAY, APRIL 28, 2005, AT 10:00 A.M. CENTRAL STANDARD TIME
THE CENTRE, 715 LOCUST STREET, EVANSVILLE, INDIANA
RETAIN ADMISSION TICKET.
\/ DETACH AND RETURN R.S.V.P. CARD HERE. \/
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PLEASE RESPOND BY APRIL 21, 2005
Kindly print your name(s)
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# of people attending meeting only.
--------------------------
# of people attending meeting and luncheon.
--------------------------
Please return R.S.V.P. card with your Proxy in the enclosed envelope.
\/ DETACH PROXY CARD HERE \/
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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 28, 2005, AND ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
The undersigned hereby appoints Stephan E. Weitzel, Peter B. Mogavero, 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 24, 2005, and
which the undersigned is entitled to vote at the Annual Meeting of Shareholders
to be held on April 28, 2005, and all adjournments or postponements thereof, on
the following matters.
1. The election of Directors in Class III 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 - Alan W. Braun 02 - Andrew E. Goebel
03 - Robert G. Jones 04 - Charles D. Storms
/ / 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, 2005.
FOR / / AGAINST / / ABSTAIN / /
OLD NATIONAL BANCORP
ONE MAIN STREET
EVANSVILLE, INDIANA 47708
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INTERNET VOTING INSTRUCTIONS
You can vote by Internet 24 hours a day, 7 days a week.
To vote online, have the voting form in hand, go to WWW.OLDNATIONAL.COM and
follow the simple online instructions.
Note: If voting by Internet, your Internet vote authorizes the named proxies to
vote your shares in the same manner as if you had marked, signed and returned
your Proxy Card. The Internet voting facilities will close at 12:00 p.m.
(Central Time Zone) on April 27, 2005.
VOTE BY MAIL
On the reverse side, please mark your Proxy Card. Then sign, date, and return
the Proxy Card in the enclosed postage-paid envelope. IF YOU VOTE BY INTERNET,
PLEASE DO NOT RETURN YOUR PROXY CARD IN THE MAIL.
SIGN AND DATE THIS CARD.
\/ DETACH PROXY CARD HERE \/
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3. Approval of the Old National Bancorp Short-Term Incentive Compensation Plan.
FOR / / AGAINST / / ABSTAIN / /
4. The Proxies are hereby granted authority to vote, in their discretion, upon
such other business as may properly come before the April 28, 2005 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, 2 AND 3.
ALL EARLIER PROXIES ARE HEREBY REVOKED.
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Signature(s) Date
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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.