(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transaction applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
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 filing. |
(1) | Amount Previously paid: |
(2) | Form, Schedule or Registration Statement No.: |
(3) | Filing Party: |
(4) | Date Filed: |
1. Election of |
2. Advisory Approval of Executive Compensation.Approval of the compensation of 1st Source Corporation’s executive officers disclosed in this Proxy Statement. |
3. Other Business. Such other matters as may properly come before the meeting or any adjournment thereof. |
Name and Address | Type of Ownership | Amount | % of Class | ||||||
Ernestine M. Raclin(1) | Direct | 31,329 | 0.12 | % | |||||
100 North Michigan Street | Indirect(2) | 5,384,750 | 21.59 | % | |||||
South Bend, IN 46601 | Total | 5,416,079 | 21.71 | % | |||||
Christopher J. Murphy III | Direct | 859,765 | 3.43 | % | |||||
100 North Michigan Street | Indirect(3) | 2,415,198 | 9.63 | % | |||||
South Bend, IN 46601 | Total | 3,274,963 | 13.06 | % | |||||
Dimensional Fund Advisors LP | Direct(4) | 1,838,114 | 7.33 | % | |||||
Palisades West, Building One, | |||||||||
6300 Bee Cave Road | |||||||||
Austin, Texas, 78746 | |||||||||
1st Source Bank as Trustee for the 1st Source | Direct | 1,440,652 | 5.75 | % | |||||
Corporation Employee Stock Ownership and Profit Sharing Plan Trust |
Name and Address | Type of Ownership | Amount | % of Class | ||||
Ernestine M. Raclin(1) | Direct | 31,329 | 0.12 | % | |||
100 North Michigan Street | Indirect (2) | 5,384,750 | 21.59 | % | |||
South Bend, IN 46601 | Total | 5,416,079 | 21.71 | % | |||
Christopher J. Murphy III | Direct | 831,592 | 3.34 | % | |||
100 North Michigan Street | Indirect(3) | 2,425,760 | 9.72 | % | |||
South Bend, IN 46601 | Total | 3,257,352 | 13.06 | % | |||
Dimensional Fund Advisors LP | Direct(4) | 1,859,084 | 7.45 | % | |||
Palisades West, Building One, | |||||||
6300 Bee Cave Road | |||||||
Austin, Texas, 78746 | |||||||
1st Source Bank as Trustee for the 1st Source | Direct | 1,261,390 | 5.06 | % |
Mrs. Raclin is the mother-in-law of Mr. Murphy. |
(2) | Owned indirectly by Mrs. Raclin who disclaims beneficial ownership thereof. Most of these securities are held in trusts, of which 1st Source Bank is the trustee and has sole voting power. While Mrs. Raclin is an income beneficiary of many of these trusts, the ultimate benefit and ownership will reside in her children and grandchildren. |
(3) | Owned indirectly by Mr. Murphy who disclaims beneficial ownership thereof. The securities are held by Mr. Murphy’s wife and children, or in trust or limited partnerships for the benefit of his wife and children. Mr. Murphy is not a current income beneficiary of most of the trusts. Due to the structure of various trusts and limited partnerships, 77,066 shares are shown both in Mr. Murphy’s and Mrs. Raclin’s ownership. |
(4) | As reported in Form 13G filed February |
Beneficial Ownership of Equity Securities(2) | ||||||
Name | Age | Principal Occupation(1) | Year in Which Directorship Assumed | Common Stock | % of Class | |
Nominees for Election to the Board of Directors | ||||||
Terms Expiring in April, 2010 (April, 2011 if reelected) | ||||||
Dane A. Miller, Ph.D. | 64 | Formerly, President, Chief Executive Officer and Director, Biomet, Inc. (medical products and technology) | 1987 | 20,683 | * | |
• | Over 30 years of business experience as the founder and former President and Chief Executive Officer of Biomet, Inc. As former head of Warsaw-based Biomet, Inc., Dr. Miller contributes long-term perspective, current knowledge, and extensive contacts in a community wh ere many manufacturing and retail customers are located. | |||||
• | Unique expertise in the orthopaedic replacements/manufacturing industry as well as general sales and engineering knowledge. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as director of Kosciusko Community Hospital, a member of the President’s Council for Grace College and Seminary, a board member of the Kosciusko Leadership Academy, a board member of the University of Chicago Hospitals and Health System, and an active volunteer with Combined Community Services. | |||||
• | B.S. in Mechanical Materials—Science Engineering from the General Motors Institute, and Masters and Ph.D. degrees in Materials Science—Biomedical Engineering from the University of Cincinnati. | |||||
Terms Expiring in April, 2010 (April, 2013 if reelected) | ||||||
Daniel B. Fitzpatrick | 52 | Chairman and Chief Executive Officer, Quality Dining, Inc. (quick service and casual dining restaurant operator) | 1995 | 42,000 | * | |
• | 28 years of business experience as the founder, Chairman and Chief Executive Officer of Quality Dining, Inc. As head of a locally headquartered, multi-concept restaurant company with operations located in seven states, Mr. Fitzpatrick contributes long-term perspective, current knowledge, and extensive contacts in communities in which the Company does business. | |||||
• | Unique expertise in the restaurant industry and general knowledge of services retailing. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as Past Chairman of the Holy Cross College Board of Trustees and board member for Women’s Care Center Foundation. Mr. Fitzpatrick has served with nearly two dozen other community organizations. | |||||
• | B. A. in Business Administration from the University of Toledo. | |||||
Wellington D. Jones III | 65 | Executive Vice President, 1st Source Corporation, and President and Chief Operating Officer, 1st Source Bank | 1998 | 249,842 | * | |
• | 12 years of business experience as President and Chief Operating Officer of 1st Source Bank and Executive Vice President of 1st Source Corporation, and 22 years of experience in other positions with 1st Source Bank. Mr. Jones contributes long-term perspective, current knowledge, and extensive contacts in all communities in which the Company does business. | |||||
• | Extensive knowledge of 1st Source Bank and general knowledge in the finance/banking industry. | |||||
• | Serves as Chairman of the Board for Memorial Hospital of South Bend for which he is also a member of the Memorial Hospital/Health System Finance Committee, the Strategic Planning Committee, the Executive Committee and the Compensation Committee. Also serves as a board member for the Boys & Girls Clubs of St. Joseph County and the South Bend Regional Sports Commission. | |||||
• | B. S. degree in Business Administration, Finance Major from Northwestern University and a graduate of the University of Wisconsin Graduate School of Banking and the Harvard University, Graduate School of Business Administration, Advanced Management Program. |
Beneficial Ownership of Equity Securities(2) | ||||||
Name | Age | Principal Occupation(1) | Year in Which Directorship Assumed | Common Stock | % of Class | |
Directors Continuing in Office | ||||||
Terms Expiring in April, 2011 | ||||||
Terry L. Gerber | 69 | President and Chief Executive Officer, Gerber Manufacturing Company, Inc. (clothing manufacturer) | 2004 | 12,343 | * | |
• | 40 years of business experience as President and Chief Executive Officer of Gerber Manufacturing Company, Inc., a family-owned business. As head of a third-generation business that has been locally based for over 85 years, Mr. Gerber contributes long-term perspective, current knowledge, and extensive contacts in a community in which the Company does business. | |||||
• | Unique expertise in the clothing manufacturing industry as well as general knowledge of sales and engineering. | |||||
• | Served as Chairman of Memorial Hospital of South Bend, Chairman of Memorial Health System, director of the Family and Children’s Center and director of United Way, Inc. | |||||
• | M.B.A. from Indiana University and a Bachelors of Industrial and Systems Engineering degree from the Georgia Institute of Technology. | |||||
Lawrence E. Hiler | 64 | Chairman, Hiler Industries (metal castings) | 1992 | 2,381 | * | |
• | 28 years of business experience as Chairman and President of Hiler Industries. As head of Hiler Industries, which has several locations in the company’s footprint, Mr. Hiler contributes long-term perspective, current knowledge, and extensive contacts in a number of communities where the Company does business. | |||||
• | Unique expertise in metal castings/manufacturing industry and general management knowledge. Mr. Hiler also is a former director and owner of a community bank. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as President of the Walkerton Industrial Fund, Secretary of LaPorte Hospital, Inc. and a member of the Purdue University Advisory Council. | |||||
• | B.S. in Industrial Management from Purdue University. | |||||
Rex Martin | 58 | Chairman and Chief Executive Officer, NIBCO, Inc. (copper and plastic plumbing parts manufacturer) | 1996 | 5,122 | * | |
• | 24 years of business experience as Chairman and Chief Executive Officer of NIBCO, Inc., a family-owned business. As head of Elkhart, Indiana-based NIBCO, Inc., Mr. Martin contributes long-term perspective, current knowledge, and extensive contacts in a community where the Company does business. | |||||
• | Unique expertise in the copper and plastic plumbing parts manufacturing industry and general knowledge of sales and marketing. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as Founder and Director of the Rex and Alice A. Martin Foundation, and Elkhart County Chairman and board member of the American Red Cross. Mr. Martin also is a board member of the Elkhart County Community Foundation and the Park Foundation of Elkhart, Indiana. | |||||
• | B.A. in English from Indiana University and an M.B.A. from the Massachusetts Institute of Technology. |
Christopher J. Murphy III | 63 | Chairman of the Board, President and Chief Executive Officer, 1st Source and Chairman of the Board and Chief Executive Officer, 1st Source Bank; former Director, Quality Dining, Inc. | 1972 | 3,274,963(3) | 13.06% | |
• | Over 30 years of business experience with 1st Source, including serving as President and Chief Executive Officer of both 1st Source and 1st Source Bank for approximately 30 years. Mr. Murphy contributes long-term perspective, current knowledge, and extensive contacts in all communities in which the Company does business. Prior to 1st Source, Mr. Murphy worked at Citibank. | |||||
• | Extensive knowledge of 1st Source and 1st Source Bank and general knowledge in the finance/banking industry. | |||||
• | Serves on the boards of the University of Chicago Hospitals and Health System, South Bend Center for Medical Education (Indiana University Medical School at Notre Dame), the Indiana Board of Depositories, the Indiana State Chamber of Commerce, the Indiana Commission for Higher Education, and the Regional Approach to Progress. | |||||
• | B.A. in Government from the University of Notre Dame, a J.D. from the University of Virginia Law School and an M.B.A. from the Harvard University School of Business. |
Timothy K. Ozark | 60 | Chairman and Chief Executive Officer, Aim Financial Corporation (mezzanine funding and leasing) | 1999 | 17,184 | * | |
• | 18 years of business experience as founder, Chairman and Chief Executive Officer of Aim Financial Corporation, a mezzanine lender to privately-held companies. Also President and CEO of TKO Finance Corporation, a lender to financial services and manufacturing companies. | |||||
• | Expertise in mezzanine funding and lending-leasing and general knowledge of finance. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as Lead Director. | |||||
• | Serves as a member of the Board of Trustees for The University of Chicago Hospitals and on the Board of Directors for a number of privately held companies. | |||||
• | B.S. in Business Administration from the University of Minnesota and an M.B.A. from St. Cloud State University. |
Beneficial Ownership of Equity Securities(2) | |||||
Name | Age | Principal Occupation(1) | Years in Which Directorship Assumed | Common Stock | % of Class |
Nominees for Election to the Board of Directors | |||||
Term Expiring in April, 2009 (April, 2011 if reelected) | |||||
Terry L. Gerber | 68 | President and Chief Executive Officer, Gerber Manufacturing Company, Inc. (clothing manufacturer) | 2004 | 12,143 | * |
Terms Expiring in April, 2009 (April, 2012 if reelcted) | |||||
William P. Johnson | 66 | Chief Executive Officer, Flying J, LLC (consulting) | 1996 | 29,016 | * |
Craig A. Kapson | 58 | President, Jordan Automotive Group (automotive dealerships) | 2004 | 27,441 | * |
John T. Phair | 59 | President, Holladay Properties (real estate development) | 2004 | 45,187 | * |
Mark D. Schwabero | 56 | President, Mercury Marine (marine propulsion systems); prior thereto, President, Outboard Business Unit, Mercury Marine | 2004 | 4,121 | * |
Directors Continuing in Office | |||||
Terms Expiring in April, 2010 | |||||
Daniel B. Fitzpatrick | 51 | Chairman and Chief Executive Officer, Quality Dining, Inc. (quick service and casual dining restaurant operator) | 1995 | 29,000 | * |
Wellington D. Jones III | 64 | Executive Vice President, 1st Source Corporation, and President and Chief Operating Officer, 1st Source Bank | 1998 | 242,801 | * |
Dane A. Miller, Ph.D. | 63 | Formerly, President and Chief Executive Officer, Biomet Inc. (medical products and technology) | 1987 | 18,804 | * |
Terms Expiring in April, 2011 | |||||
Lawrence E. Hiler | 63 | Chairman, Hiler Industries (metal castings) | 1992 | 2,166 | * |
Rex Martin | 57 | Chairman and Chief Executive officer, NIBCO, Inc. (copper and plastic plumbing parts manufacturer) | 1996 | 4,322 | * |
Christopher J. Murphy III | 62 | Chairman of the Board, President and Chief Executive Officer, 1st Source Corporation; and Chairman of the Board and Chief Executive Officer, 1st Source Bank | 1972 | 3,257,352(3) | 13.06% |
Timothy K. Ozark | 59 | Chairman and Chief Executive Officer, Aim Financial Corporation (mezzanine funding and leasing) | 1999 | 16,184 | * |
Non-Director Executive Officers | |||||
Richard Q. Stifel | 67 | Executive Vice President, Loan Services Group and Chief Credit Officer, 1st Source Bank (since 1992) | 119,940 | * | |
Allen R. Qualey | 56 | President and Chief Operating Officer, Specialty Finance Group, 1st Source Bank (since 1997) | 121,031 | * | |
John B. Griffith | 51 | Senior Vice President, General Counsel and Secretary, 1st Source Corporation and 1st Source Bank (since 2001) | 19,406 | * | |
Larry E. Lentych | 62 | Senior Vice President, Treasurer and Chief Financial Officer, 1st Source Corporation and 1st Source Bank(since 1998) | 85,744 | * | |
All Directors and Executive Officers as a Group (18 persons) | 4,034,658 | 16.17% |
Beneficial Ownership of Equity Securities(2) | |||||
Name | Age | Principal Occupation(1) | Year in Which Directorship Assumed | Common Stock | % of Class |
Terms Expiring in April, 2012 | ||||||
William P. Johnson | 67 | Chief Executive Officer, Flying J, LLC (consulting); Director and Chairman of the Board, Coachman Industries, Inc. | 1996 | 31,960 | * | |
• | 43 years of business experience as Chief Executive Officer of Flying J, LLC and as former President, Chairman of the Board, and Chief Executive Officer of Goshen Rubber Co., Inc. and its subsidiaries, a family owned business. Mr. Johnson also serves as a board member of One America Life Insurance Company, Schurz Communications, Inc. and ITR Concessions Company, LLC. As head of businesses based in Elkhart County, Mr. Johnson contributes long-term perspective, current knowledge, and extensive contacts in a community where many manufacturing and retail customers are located. | |||||
• | Manufacturing, general management, investment and legal knowledge. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves as Chairman of the Boys’ Club Foundation, founding Co-chairman of the Elkhart County Community Foundation and founding Chairman of the Goshen Partners in Education. | |||||
• | B.S. in Business Administration from the University of Notre Dame and a J.D. from the Stanford Universty Law School. |
Craig A. Kapson | 59 | President, Jordan Automotive Group (automotive dealerships) | 2004 | 27,592 | * | |
• | 29 years of business experience as President of Jordan Automotive Group. As head of a second-generation business that has been locally based for over 62 years, Mr. Kapson contributes long-term perspective, current knowledge, and extensive contacts in a community in which the company does business. | |||||
• | Unique expertise in retail and fleet automobile sales and general knowledge of retailing. | |||||
• | Served as an Executive Board member of WNIT Public Television and Executive Board member of the South Bend Symphony Association. | |||||
• | B.A. in Economics from Olivet College. |
John T. Phair | 60 | President, Holladay Properties (real estate development) | 2004 | 49,292 | * | |
• | 12 years of business experience as President of Holladay Properties and a total of 31 years in the real estate industry. Mr. Phair also is the managing partner of approximately 75 commercial partnerships and 13 joint ventures. Prior to joining Holladay Properties, Mr. Phair spent seven years in the mortgage-banking field. As head of a locally based business, Mr. Phair contributes current knowledge and extensive contacts in a community in which the company does business. | |||||
• | Unique expertise in real estate development as well as general knowledge of the construction, hospitality, finance, and real estate industries. | |||||
• | Serves on the boards of the Boys & Girls Club of St. Joseph County, Family & Children’s Center, WNIT Public Television, the South Bend Civic Theatre, the Alliance of Indiana (IU Kelly School of Business) Project Future and the Villages of Indiana. | |||||
• | B.A. in Political Science from Marquette University. |
Mark D. Schwabero | 57 | President, Mercury Marine (marine propulsion systems); prior thereto, President, Outboard Business Unit, Mercury Marine | 2004 | 4,121 | * | |
• | 6 years of business experience as President of Mercury Marine and as former President of Mercury Outboards as well as 28 years experience as a senior executive in the automotive and commercial vehicle/manufacturing industries. | |||||
• | Unique knowledge of these industries and management expertise. | |||||
• | Qualifies as a financial expert under SEC guidelines. | |||||
• | Serves on the Advisory Committee of the Ohio State University College of Engineering and the Center for Automotive Research. | |||||
• | B.S. and M.S. degrees in Industrial and Systems Engineering from The Ohio State University. |
Non-Director Executive Officers | |||||
Allen R. Qualey | 57 | President and Chief Operating Officer, Specialty Finance Group, 1st Source Bank (since 1997) | 116,633 | * | |
John B. Griffith | 52 | Senior Vice President, General Counsel and Secretary, 1st Source Corporation and 1st Source Bank (since 2001) | 25,950 | * | |
Larry E. Lentych | 63 | Senior Vice President, Treasurer and Chief Financial Officer, 1st Source Corporation and 1st Source Bank (since 1988) | 87,141 | * | |
All Directors and Executive Officers as a Group (15 persons) | 3,967,207 | 15.83% |
* | Represents holdings of less than 1%. |
(1) | The principal occupation represents the employment for the last five years for each of the named directors and executive officers. Directorships presently held or held within the last five years in other registered corporations are also disclosed. |
(2) |
(3) |
Committee | Members | Functions | ||
Executive and | Christopher J. Murphy III Timothy K. Ozark (1) Daniel B. Fitzpatrick William P. Johnson Rex Martin | • Serve as senior committee with oversight responsibility | ||
for effective governance of the Company. | ||||
• Act for the Board of Directors between meetings | ||||
subject to certain statutory limitations. | ||||
• Identify and monitor the appropriate structure of the Board. | ||||
• Select Board members for committee assignments. | 4 | |||
Nominating(2) | Timothy K. Ozark (1) Daniel B. Fitzpatrick William P. Johnson Rex Martin | • Identify, evaluate, recruit and select qualified candidates for | ||
election, re-election or appointment to the Board | ||||
of Directors. | ||||
• See also “Nominating Committee Information” below. | 3 | |||
Audit(2) | Mark D. Daniel B. Fitzpatrick Terry L. Gerber Lawrence E. Hiler Timothy K. Ozark | • Select the Company’s independent registered public accounting firm. | ||
• Review the scope and results of the audits by the internal audit staff | ||||
and the independent registered public accounting firm. | ||||
• Review the adequacy of the accounting and financial controls | ||||
and present the results to the Board of Directors with respect | ||||
to accounting practices and internal procedures. Make | ||||
recommendations for improvements in such procedures. | ||||
• Review and oversight of the Company’s compliance with ethics policies | ||||
and regulatory requirements. | ||||
• See also “Report of the Audit Committee” below. | 6 | |||
Executive Compensation and Human Resources(2) | Rex Daniel B. Fitzpatrick William P. Johnson Timothy K. Ozark | • Determine compensation for senior management personnel, | ||
review performance of the Chief Executive Officer and manage | ||||
the Company’s stock plans. | ||||
• Establish wage and benefit policies for the Company and its subsidiaries. | ||||
• Review human resources guidelines, policies and procedures. | ||||
• See also “Report of the Executive Compensation and Human Resources | ||||
Committee” below. | 4 |
• |
• | The need for decisive leadership and clear accountability in facing 1st Source’s challenges and opportunities; |
• | Mr. Murphy’s extensive specialized knowledge regarding those challenges and opportunities as well as his large ownership position; and |
• | The large majority of independent directors provide for an appropriate amount of external Board oversight. |
• | Establishing the credit policy for the Bank; |
• | Reviewing Bank lending activities, including approvals of loans to new or existing customers of total commitments in excess of stated amounts; |
• | Conducting quarterly reviews of the adequacy of the allowance for loan and lease losses and loan concentrations as compared to established limits; and |
• | Reviewing the Bank’s Funds Management Division in its investment activities, relationships with securities dealers, relationships with other depository institutions, administration of 1st Source’s asset/liability management and liquidity functions and other activities. |
• | Exercising general supervision over the fiduciary activities of the Personal Asset Management Group and the Retirement Plan Services Division; |
• | Assigning the administration of those fiduciary powers to such officers, employees and committees as the Committee deems appropriate; |
• | Directing and reviewing the actions of all individuals or committees used by the Bank in the exercise of the fiduciary powers and services offered to clients; |
• | Implementing and periodically evaluating appropriate policies, practices and controls to promote high quality fiduciary administration; and |
• | Overseeing appropriate policies and procedures to ensure the Bank makes appropriate investments. |
• Whether the nominee is under the mandatory retirement age of 70; |
• Qualifications, including judgment, skill, capability, conflicts of interest, business experience, technical/professional/educational background; |
• Personal qualities and characteristics, accomplishments and reputation in the business community; |
• Current knowledge and contacts in the communities or industries in which the Company does business; |
• Ability and willingness to commit adequate time, or in the case of incumbent directors, past participation and contribution, to Board and Committee matters; |
• The interplay of the nominee’s experience with that of the other Board members; |
• The extent to which a nominee would be a desirable addition to the Board and any committee of the Board; |
• If applicable, whether the nominee would be deemed “independent” under marketplace rules of the Nasdaq Stock Market and SEC regulations; |
• Whether the nominee is qualified and likely to remain qualified to serve under the Company’s By-laws and Corporate Governance Guidelines; |
• Diversity of viewpoints, background, experience and other demographics; and |
• Such other factors the Committee deems relevant. |
Audit Committee | ||||||
Mark D. Schwabero, Chairman | ||||||
Daniel B. Fitzpatrick | Terry L. Gerber | |||||
Lawrence E. Hiler | Timothy K. Ozark |
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Base Salaries: Annual base salary is designed to compensate 1st Source executives for their qualifications, responsibilities and performance. Salaries are administered under the 1st Source Salary Administration Program for all exempt employees. Through this program, positions are rated under direction of the Human Resources Department and placed in a competitive salary range. Annually, management establishes a salary performance grid that sets the range of merit increases that may be given to exempt personnel, including officers, depending on their individual performance and position in the respective salary range. The salary performance grid is reviewed, adjusted and approved annually by the Executive Compensation and Human Resources Committee based on market and industry information, including data from |
• Achieved performance and |
• Achieved performance and results beyond level expected; |
• Consistently strong overall performance and |
• Inconsistently overall performance and results; and |
• Failed to achieve results and perform at expected level. |
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of the Company are either added to the book value per share or are paid out as dividends on all outstanding shares (including book value shares still subject to forfeiture). In this way, the value of the book value shares are protected from fluctuations in the stock market that are unrelated to performance of the Company. The executive generally is required to hold the book value shares until retirement except that seven years after the forfeiture risk has lapsed, subject to the approval of the Company, the executive may sell 50% of these vested book value shares back to the Company at its then book value for specific purposes: purchase of a personal residence or second home, college education tuition or financial hardship. |
Five-Year Long-Term Incentive Awards: |
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Stock Awards | Non-Equity Incentive Plan | All Other | |||||||||||||||||||
Name and Principal Position | Year | Salary($)(1) | ($) (2) | Compensation($) | Compensation($)(3) | Total(7) | |||||||||||||||
Christopher J. Murphy III | 2009 | 684,554 | $ | 47,502 | $ | 182,105 | (4) | $ | 76,730 | $ | 990,891 | ||||||||||
Chairman, President & CEO | 2008 | 654,031 | 113,510 | 214,430 | 84,356 | 1,066,327 | |||||||||||||||
1st Source, and Chairman | 2007 | 649,231 | 222,663 | 418,890 | 71,875 | 1,362,659 | |||||||||||||||
& CEO, 1st Source Bank | |||||||||||||||||||||
Larry E. Lentych | 2009 | 238,846 | 15,018 | 43,100 | 28,574 | 325,538 | |||||||||||||||
Senior Vice President, | 2008 | 226,616 | 31,505 | 15,000 | 28,353 | 301,474 | |||||||||||||||
Treasurer & CFO | 2007 | 216,281 | 45,854 | 31,500 | 28,913 | 322,548 | |||||||||||||||
Wellington D. Jones III | 2009 | 388,385 | 43,512 | 5,250 | (4) | 56,309 | 523,456 | ||||||||||||||
Executive Vice President, | 2008 | 369,385 | 54,504 | 43,500 | 57,069 | 524,458 | |||||||||||||||
1st Source, and President | 2007 | 354,693 | 97,383 | 54,500 | 57,616 | 564,192 | |||||||||||||||
& COO, 1st Source Bank | |||||||||||||||||||||
John B. Griffith | 2009 | 292,471 | 22,509 | 24,750 | (4) | 28,292 | 368,022 | ||||||||||||||
Senior Vice President, | 2008 | 277,827 | 30,004 | 22,500 | 26,726 | 357,057 | |||||||||||||||
General Counsel & | 2007 | 267,194 | 61,877 | 30,000 | 26,392 | 385,463 | |||||||||||||||
Secretary | |||||||||||||||||||||
Richard Q. Stifel | 2009 | 285,504 | 22,509 | 18,959 | (4) | 33,075 | 360,047 | ||||||||||||||
Executive Vice President, | 2008 | 248,649 | 41,012 | 22,500 | 32,697 | 344,858 | |||||||||||||||
Business Banking Group | 2007 | 241,411 | 52,890 | 41,000 | 32,826 | 368,127 | |||||||||||||||
1st Source Bank |
(1) | 2009 amounts include 27 biweekly pay periods rather than normal 26 resulting in reported amounts in excess of stated base salaries. |
(2) | Amounts included in Stock Awards |
Amounts included in All Other Compensation for the most recent fiscal year are as follows: |
Company Contributions to Defined Contribution Retirement | Dividends on Stock Awards | Directors’ Fees | Perquisites | Other Amounts of $10,000 or Less | Total | |
Mr. Murphy (5) (6) | $19,030 | $19,964 | $18,000 | $14,192 | $5,544 | $76,730 |
Mr. Lentych | 19,030 | 6,281 | – | * | 3,263 | 28,574 |
Mr. Jones | 19,030 | 13,735 | 18,000 | * | 5,544 | 56,309 |
Mr. Griffith | 19,030 | 6,407 | – | * | 2,855 | 28,292 |
Mr. Stifel | 19,030 | 7,096 | – | * | 6,949 | 33,075 |
Name | Company Contributions to Defined Contribution Retirement Plans | Dividends on Stock Awards | Directors’ Fees | Perquisites | Other Amounts of $10,000 or Less | Total |
Mr. Murphy (5) (6) | $17,853 | $19,281 | $18,000 | $23,678 | $5,544 | $84,356 |
Mr. Lentych | 17,853 | 7,237 | - | * | 3,263 | 28,353 |
Mr. Jones | 17,853 | 15,672 | 18,000 | * | 5,544 | 57,069 |
Mr. Griffith | 17,853 | 6,018 | - | * | 2,855 | 26,726 |
Mr. Stifel | 17,853 | 7,895 | - | * | 6,949 | 32,697 |
* | Not included - total of perquisites and benefits is less than $10,000
GRANTS OF PLAN-BASED AWARDS Estimated Future Payouts Under Equity Incentive Plan “Book Value” Awards (#Shares)
Note: There were no non-equity incentive plan awards with future payouts made during 2009. NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS TABLE Employment Mr. Murphy, Mr. Jones Mr. Murphy’s agreement provides for a $659,200 base salary at January 1, Each of the agreements expires on December 31, If an executive terminates employment because of any adverse change in his status, then he would continue to receive his base salary for a period of time after his termination. Mr. Murphy would receive the equivalent of 36 months of base salary with the first six months payable in a lump sum. Messrs. Jones, If an executive terminates employment within one year of a change in control (which term includes any third party which becomes beneficial owner of 50% or more of the outstanding stock of 1st Source, the election of a majority of new directors in connection with a sale, merger, other business combination or contested board of directors election, or shareholder approval of any transaction which results in a disposition of all or substantially all of the assets of 1st Source), then he will receive severance pay in cash equal to 2.99 times his “Annualized Includable Compensation for the Base Period” (as defined under the Internal Revenue Code of 1986, as amended). The employment agreements also include restrictive covenants which require, among other things, that the executives not compete with 1st Source in bank or bank-related services within the geographic region in which full‑service retail branches of 1st Source Bank or any affiliate are located. The agreements also prohibit the executives from ever divulging confidential information or trade secrets after termination of employment. In the event an executive’s employment is terminated because of disability and in addition to other disability programs in effect for all officers of 1st Source, the executive will receive twelve months of base salary, with the first six months payable in a lump sum and the balance paid in monthly installments beginning on the first day of the seventh month following the date of termination. In connection with the Company’s participation in the United States Department of the Treasury’s (Treasury) TARP Capital Purchase Program, Mr. Murphy, Mr. Jones, Mr. Lentych Messrs. Murphy, Jones, Lentych, Bonus Bonuses under 1st Source’s Executive Incentive Plan (EIP) are determined annually following the close of the year. The bonus is calculated based on the officer’s “partnership level” adjusted for the Company’s performance relative to plan and for the individual’s personal performance relative to weighted objectives set by the individual with his or her supervisor at the beginning of the year. For the named executives, the base bonus is calculated at a “partnership level” ranging from 20% to 30% of their salaries. For each 1% that the Company varies from its profit plan for the year, the base bonus is adjusted up or down by 2.5%. Finally, this possible bonus is adjusted by the individual’s performance ranging from 0% to 300% of the possible bonus. Under the terms of the EIP, 50% of an Executive Incentive Plan bonus normally is paid in cash at the time of the award. The other 50% is paid in “Book Value” stock which is subject to forfeiture over the succeeding five (5) years. “Book Value” shares may only be sold to 1st Source, and such sale is mandatory in the event of death, retirement, disability or termination of employment. 1st Source may terminate or extend the Plan at any time. The forfeiture lapses ratably for each year the employee remains with the Company and for each year, or period of years, the Company grows its net income by a targeted minimum per year. During this period, the “at risk” portion of the bonus, delineated in book value stock, is transferred to the participant as the forfeiture period lapses. In Mr. Murphy’s case, while determined in book value stock, the award is paid in cash as the forfeiture lapses. Due to the restrictions placed on bonuses to senior executive officers as part of the Company’s participation in the Capital Purchase Program (CPP) established pursuant to the Emergency Economic Stabilization Act of 2008 (EESA) and the American Recovery and Reinvestment Act of 2009 (ARRA), only 20.83% of the 2009 Executive Incentive Plan bonuses are to be paid to Mr. Murphy, Mr. Jones, Mr. Griffith and Mr. Stifel in cash which may be paid only after the Company’s repayment of its preferred stock issued pursuant to its participation in the CPP. The remaining 29.17% which normally would be paid in cash was paid in market value stock which is subject to forfeiture if the individual leaves the Company within two years after the date of grant and may only be paid upon the later of two years from the date of the grant or the Company’s repayment of its preferred stock issued pursuant to its participation in the CPP. Additionally, while the customary 50% book value stock payment was made to Mr. Jones, Mr. Griffith and Mr. Stifel, the forfeiture period for these book value shares issued pursuant to the 2009 Executive Incentive Plan bonuses may lapse only upon the later of the lapsing of the forfeiture period under the Executive Incentive Plan, two years or the Company’s repayment of its preferred stock issued pursuant to its participation in the CPP. This book value stock is subject to forfeiture if the individual leaves the Company within two years after the date of grant. The remaining 50% of Mr. Murphy’s 2009 bonus was paid in market value stock as discussed in the “Chief Executive Officer Performance and Compensation” section. - 10 - - Due to the Company’s performance in 2002, the remaining 20% of the award made in 1997 would be forfeited. In early 2003 Mr. Murphy asked that the forfeiture period for these awards be extended for four (4) years for all members of the Executive Incentive Plan except those most senior officers (including Mr. Murphy and Mr. Jones) of the Corporation with credit and management authority bearing full responsibility for the Company’s performance. The recommendation for the extension was made in an effort to encourage the management team throughout the Company to accelerate their efforts to return 1st Source to its historic earnings levels. This extension was approved by the Board of Directors and the shareholders. The Board and shareholders also approved extensions of the forfeiture period for the awards made in 1998, 1999, 2000 and 2001 by four (4) years for all members of the Executive Incentive Plan except Mr. Murphy, who forfeited the remaining 20% and 60%, respectively of the 1997 and 1998 award in January 2003 and January 2004 and the remaining 100% of the 1999, 2000 and 2001 awards in January 2005, January 2006 and January 2007, respectively. All other members of the Executive Incentive Plan forfeited the remaining 20% of the 1997 awards in January 2007, the remaining 60% of the 1998 awards in January 2008, Mr. Murphy was also eligible for a cash bonus under the 1998 Performance Compensation Plan based on goals established at the beginning of each year. For 2007, 2008 and The amounts shown in the Stock Awards Recipients of unvested book value and market value shares granted under the Executive Incentive Plan receive dividends at the same time and in the same amount as all other holders of 1st Source common stock.
(1) Shares vested for purposes of this table and the following table are awarded shares which are no longer subject to forfeiture under the terms of the Executive Incentive Plan (2) Vesting dates for these awards are as follows:
Note: Shares vesting based on calendar year results (e.g., 12/ (3) Awards of book value shares to these individuals pursuant to their 2008 Executive Incentive Plan bonuses and which are included in this table have been restated so that the forfeiture period for these shares may lapse only upon the later of the forfeiture period under the Executive Incentive Plan, two years or the Company’s repayment of its preferred stock issued pursuant to its participation in the CPP. These awards are subject to forfeiture if the individual leaves the Company within two years after the date of grant. OPTION EXERCISES AND STOCK VESTED
DIRECTOR COMPENSATION
Note: There were no stock awards, option awards, non-equity incentive plan compensation, pension or other deferred compensation earnings or other compensation paid to non-employee directors in 2009. Executive Compensation and Human Resources Committee Report The Executive Compensation and Human Resources Committee has reviewed and discussed the Compensation Discussion & Analysis section of this proxy statement with management. In reliance on these reviews and discussions, the Committee recommended to the Board of Directors that the Compensation Discussion & Analysis section be included in this proxy statement. As discussed in the Compensation Discussion & Analysis, the senior executive officer compensation plans include both equity and cash components that link executive compensation to the Company’s overall performance on both a short-term and long-term basis, subject to forfeiture based on the executive remaining with the Company and on long-term real economic performance of the Company. As such, these plans do not encourage the senior executive officers to take unnecessary and excessive risks that threaten the Company. Nor do they encourage the manipulation of earnings of the Company to enhance the compensation of any employee. The Committee also identified and reviewed the Company’s five business unit incentive plans, each of which rewards measurable performance of the Company’s five major product and service segments: Business Banking, Consumer Banking, Specialty Finance, Trust and Asset Management, and Insurance. Each of these incentive plans has common features that encourage high quality, long-term relationship business and discourage unnecessary or excessive risks for short-term gain. In particular, short-term cash awards generally are capped at less than 30% of a participant’s salary midpoint and generally are much less after applying the respective individual performance metrics under the plans. Annual stock awards are similarly limited to a percentage of a participant’s salary midpoint and have long-term attributes. They carry substantial risks of forfeiture over a five year period if performance hurdles that are tied to Company performance are not cleared. They are made in book value common stock transferable only to the Company upon death, disability, normal retirement, early termination of employment, or by discretionary approval of the Committee, with less favorable payout terms upon early termination of employment. The incentive plans for lenders further mitigate excessive risks by including substantial weightings or deductions for credit quality and net charge-offs. The Committee also identified and reviewed four referral programs designed to encourage internal referrals by providing small, immaterial cash incentives to eligible participants. These features, combined with the systems of controls in place to mitigate the risks of the products and services the Company offers, limit and discourage the taking of unnecessary and excessive risks. They also discourage and mitigate the risk of manipulation of reported earnings to enhance the compensation of any employee. None of these incentive plans or referral programs, alone or in aggregate, encourages unnecessary or excessive risks or presents significant risks to the Company as a whole. Based on the foregoing, the Committee certifies that:
Executive Compensation and Human Resources Committee
Compensation Committee Interlocks and Insider Participation The persons named above were the only persons who served on the Executive Compensation and Human Resources Committee of the Board of Directors during the last fiscal year. - 12 - - Section 16(a) Beneficial Ownership Reporting Compliance The Securities Exchange Act of 1934 requires executive officers and directors to file reports of ownership and changes in ownership of 1st Source Corporation stock with the Securities and Exchange Commission and to furnish 1st Source with copies of all reports filed. Based solely on a review of the copies of such reports furnished to 1st Source and written representations from the executive officers and directors that no other reports were required, 1st Source believes that all filing requirements were complied with during the last fiscal year, except that Proposal Number 2: Background of the Proposal The American Recovery and Reinvestment Act of 2009 (“ARRA”), which was enacted on February 17, 2009, contains a requirement that financial institutions, like the Company, that issued preferred stock and warrants to the U.S. Treasury Department under the TARP Capital Purchase Program permit a separate, non-binding shareholder vote to approve the compensation of the financial institution’s executive officers. The SEC Executive Compensation The Company believes that its compensation policies and procedures are focused on “pay for performance” principles and are strongly aligned with the long-term interests of shareholders. 1st Source believes that both the Company and its shareholders benefit from responsive corporate governance policies and constructive and consistent dialogue. The proposal described below, commonly known as a “say on pay” proposal, gives shareholders the opportunity to endorse or not endorse the executive compensation program for named executive officers described in this proxy statement. A main objective of the Company’s executive compensation program is to align a significant portion of each executive officer’s total compensation with the Company’s annual and long-term performance and with the interests of its shareholders. A related objective of the executive compensation program is to attract and retain experienced, highly qualified executives so as to enhance the Company’s long-term success and shareholder value. The Company believes that Shareholders are encouraged to carefully review the "Compensation Discussion & Analysis" and "Executive Compensation Tables" sections of this proxy statement for a detailed discussion of the Company’s executive compensation program. As required by the ARRA and the guidance provided by the SEC, this proxy statement permits an advisory shareholder vote on the Company’s executive compensation plans, programs and arrangements as reflected in the Compensation Discussion & Analysis, the disclosures regarding named executive officer compensation provided in the various tables included in this proxy statement, the accompanying narrative disclosures and the other compensation information provided in this proxy statement. This proposal, commonly known as a “say on pay” proposal, gives the Company’s shareholders the opportunity to endorse or not endorse the Company’s executive compensation program and policies through the following resolution: "Resolved, that the shareholders of 1st Source Corporation approve the overall executive compensation policies and procedures employed by 1st Source Corporation and disclosed in the proxy statement for the Vote Required and Effect Approval of the Company’s executive compensation policies and procedures would require that the number of votes cast in favor of the proposal exceed the number of votes cast against the proposal. Because this shareholder vote is advisory, it will not be binding upon the Board of Directors. However, the Executive Compensation and Human Resources Committee and the Board of Directors will take into account the outcome of the vote when considering future executive compensation arrangements. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THIS PROPOSAL ON EXECUTIVE COMPENSATION. Relationship with Independent Registered Public Accounting Firm The financial statements of 1st Source are audited annually by an independent registered public accounting firm. For the year ended December 31,
Audit fees included fees associated with the annual audit and the reviews of 1st Source’s quarterly reports on Form 10-Q. Audit-related fees included fees for pension and statutory audits and accounting consultations. Tax fees included review of 1st Source’s federal and state tax returns and tax advice on other federal and state tax issues. Other fees included a subscription to an online accounting reference site. In 2003 the Audit Committee adopted an Audit and Non-Audit Services Pre-Approval Policy covering services performed by 1st Source’s independent registered public accounting firm. Under this policy the annual audit services engagement terms and fees are subject to the specific pre-approval of the Audit Committee. The Audit Committee will approve, if necessary, any changes in terms, conditions and fees resulting from changes in audit scope, company structure or other matters. Any other services provided by the independent registered public accounting firm will require specific pre-approval by the Audit Committee unless the type of service has received general pre-approval from the Audit Committee. In addition, a pre-approved type of service will require specific pre-approval if the current year fee level for the type of service will exceed the approved fee level established annually by the Audit Committee. Requests or applications to provide services that require approval by the Audit Committee will be submitted to the Audit Committee by both the independent registered public accounting firm and the Chief Financial Officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence. All fees paid to the independent registered public accounting firm for their 2009, 2008 Representatives of the firm of Ernst & Young LLP will be available to respond to questions during the Annual Meeting. These representatives have indicated that they do not presently intend to make a statement at the Annual Meeting. 1st Source intends to retain Ernst & Young LLP as its independent registered public accounting firm for the year ending December 31, Proposals of Security Holders Proposals submitted by security holders for presentation at the next Annual Meeting must be submitted in writing to the Secretary, 1st Source Corporation, on or before November - 13 - - Additional Information As to the proposals presented for approval, a plurality of the shares voted is required for approval. The Securities and Exchange Commission’s rules permit a company to deliver a single proxy statement, annual report, notice of internet availability of proxy materials or prospectus to an address shared by two or more of its shareholders. This method of delivery is referred to as “householding.” Unless shareholders request otherwise, 1st Source will “household” their proxy statement and annual report, as well as any prospectus or notice of internet availability of proxy materials, which may be sent to them. Regardless of how many 1st Source shareholders live under one roof, they will receive a single copy of each proxy statement, annual report, notice of internet availability of proxy materials or prospectus that is being mailed to shareholders. However, 1st Source will continue to deliver to every 1st Source shareholder in a household an individual proxy card in connection with any meeting of its shareholders where votes are being cast. If a shareholder prefers to receive individual copies of proxy statements, annual reports, notice of internet availability of proxy materials or prospectuses, they should call the Beneficial shareholders can request information about householding from their banks, brokers or other holders of record. Important Notice Regarding The Availability Of Proxy Materials For The Shareholder Meeting To Be Held On April A copy of 1st Source’s Annual Report on Form 10-K is furnished herewith to shareholders for the calendar year ended December 31, By Order of the Board of Directors, John B. Griffith Secretary South Bend, Indiana March 12, ![]() ![]() - 15 - - ANNUAL MEETING OF SHAREHOLDERS OF 1st SOURCE CORPORATION 1st Source Center, 4th Floor Boardroom, 100 North Michigan Street, South Bend, PROXY VOTING INSTRUCTIONS TELEPHONE Vote by phone until 11:59 PM EST the day before the meeting. MAIL- IN PERSON COMPANY NUMBER ACCOUNT NUMBER Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to be held on April The Notice of Annual Meeting of Shareholders and Proxy Statement, Annual Report and Proxy Card are available at https://materials.proxyvote.com/336901. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS 1. Election of
2. oo In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting. This Signature of Shareholder: Date: Signature of Shareholder: Date: Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ![]() 1st SOURCE CORPORATION Proxy for Annual Meeting of Shareholders on April Solicited on Behalf of the Board of Directors As an alternative to completing this form, you may enter your vote instruction by telephone at 1-800-PROXIES and follow the simple instructions. Use the Company Number and Account Number shown on your proxy card. The undersigned hereby appoints Christopher J. Murphy III, Wellington D. Jones III, and John B. Griffith and each of them proxies; to represent the undersigned, with full power of substitution, at the Annual Meeting of Shareholders of 1st Source Corporation to be held on April (Continued and to be signed on the reverse side) |