<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
1st Source Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[letterhead of 1st Source Corporation]
Post Office Box 1602
100 North Michigan Street
South Bend, Indiana 46634
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
TO THE SHAREHOLDERS OF 1ST SOURCE CORPORATION
The Annual Meeting of the Shareholders of 1st Source Corporation will be
held at the 1st Source Bank Building, 4th Floor Boardroom, 100 North
Michigan Street, South Bend, Indiana, on April 17, 1997, at 9:00 a.m. local
time, for the purpose of considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. Reelection of four Directors for terms expiring
in 2000.
2. APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN AND THE OFFERING OF
200,000 SHARES OF 1ST SOURCE CORPORATION COMMON STOCK THEREUNDER.
3. APPROVAL OF AMENDMENT TO THE 1992 STOCK OPTION PLAN. Approval of
amendment to the Stock Option Plan in order to exempt Plan benefits
from the $1 million deductibility limitation pursuant to Section
162(m) of the Internal Revenue Code of 1986, as amended.
4. OTHER BUSINESS. Such other matters as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on February 14, 1997, are
entitled to vote at the meeting.
By Order of the Board of Directors
Vincent A. Tamburo
Secretary
South Bend, Indiana
March 14, 1997
- ------------------------------------------------------------------------------
PLEASE DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, NEVERTHELESS,
VOTE IN PERSON.
- ------------------------------------------------------------------------------
<PAGE> 3
[letterhead of 1st Source Corporation]
Post Office Box 1602
100 North Michigan Street
South Bend, Indiana 46634
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of proxies to be voted at the Annual Meeting of
Shareholders of 1st Source Corporation ("1st Source"), to be held on April
17, 1997, at 9:00 a.m. local time, at the 1st Source Bank Building, 4th
Floor Boardroom, 100 North Michigan Street, South Bend, Indiana. Only
Shareholders of record at the close of business on February 14, 1997, will
be eligible to vote at the Annual Meeting. The voting securities of 1st
Source consist only of Common Stock, of which 15,738,236 shares were
outstanding on the record date. Each Shareholder of record on the record
date will be entitled to one vote for each share. Cumulative voting is not
authorized. The approximate date for making available this Proxy Statement
and the form of proxy to Shareholders is March 14, 1997. With respect to
each matter to be acted upon at the meeting, abstentions on properly executed
proxy cards will be counted for determining a quorum at the meeting; however,
such abstentions and shares not voted by brokers and other entities holding
shares on behalf of beneficial owners will not be counted in calculating
voting results on those matters for which the shareholder has abstained or
the broker has not voted.
The cost of solicitation of proxies will be borne by 1st Source. In
addition to the use of mails, proxies may be solicited through personal
interview, telephone, and telegraph by directors, officers and regular
employees of 1st Source without additional remuneration therefor.
REVOCABILITY
Shareholders may revoke their proxies at any time prior to the meeting by
giving written notice to Vincent A. Tamburo, Secretary, 1st Source
Corporation, Post Office Box 1602, South Bend, Indiana 46634, or by voting
in person at the meeting.
PERSONS MAKING THE SOLICITATION
This solicitation is being made by the Board of Directors of 1st Source.
1
<PAGE> 4
<TABLE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Ownership of beneficial owners of more than 5% of the Common Stock
outstanding at February 14, 1997:
<CAPTION>
Name and Address Type of Ownership Amount % of Class
- ---------------- ----------------- ------ ----------
<S> <C> <C> <C>
Ernestine M. Raclin Direct 331,497 2.10%
100 North Michigan Street
South Bend, IN 46601 Indirect<F1> 4,733,430 30.08
--------- -----
Total 5,064,927 32.18%
========= =====
Christopher J. Murphy III Direct 427,836 2.72%
100 North Michigan Street
South Bend, IN 46601 Indirect<F2> 1,088,040 6.91
--------- -----
Total 1,515,876 9.63%
========= =====
1st Source Bank as Trustee Direct
for the 1st Source 1,010,515 6.42%
Corporation Employees' ========= =====
Profit Sharing Plan and Trust
<FN>
<F1> Owned indirectly by Mrs. Raclin who disclaims beneficial ownership
thereof. Most of these securities are held in trust. While Mrs. Raclin is
an income beneficiary of many of these trusts, the ultimate benefit and
ownership will reside in her children and grandchildren.
<F2> Owned indirectly by Mr. Murphy who disclaims beneficial ownership
thereof. The securities are held by Mr. Murphy's wife and children, or in
trust for the benefit of his wife and children. Mr. Murphy is not a current
income beneficiary of most of the trusts.
</TABLE>
INTEREST OF CERTAIN PERSONS IN MATTERS
TO BE ACTED UPON
The Board of Directors knows of no matters to come before the Annual Meeting
other than the matters referred to in this Proxy Statement. However, if any
other matters should properly come before the meeting, the persons named in
the enclosed proxy intend to vote in accordance with their best judgment.
No director, nominee for election as director, nor officer of 1st Source has
any special interest in any matter to be voted upon other than election to
the Board of Directors. Directors, officers, and voting trustees have
indicated that they intend to vote for all directors as listed in Proposal
Number 1 and for Proposal Numbers 2 and 3.
PROPOSAL NUMBER 1: ELECTION OF DIRECTORS
DIRECTORS AND EXECUTIVE OFFICERS
The last Shareholders' meeting at which directors were elected was held on
April 23, 1996. At that meeting, 93.9% of the shares outstanding were
represented in person or by proxy. Directors were voted upon separately.
No director received negative or withheld votes of 1% or more.
The Board of Directors is divided into three (3) groups of directors whose
terms expire at different times. At this meeting, four (4) directors are to
be reelected to hold office until April, 2000, or until the qualification
and election of a successor. Directors will be elected by a plurality of
the votes cast. The following information is submitted for each nominee as
well as each director and each nondirector executive officer continuing in
office.
2
<PAGE> 5
<TABLE>
<CAPTION>
Beneficial Ownership
of Equity Securities<F1>
------------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation<F3> Assumed Stock <F2> Class
- ---- --- ------------------------ ------- ---------- -----
NOMINEES FOR REELECTION TO THE BOARD OF DIRECTORS
Terms Expiring in April, 2000
<C> <C> <S> <C> <C> <C>
Rev. E. William Beauchamp, 54 Executive Vice President, 1989 461 -
C.S.C University of Notre Dame
Paul R. Bowles 59 Former Vice President, 1988 8,182 -
Corporate Development,
Clark Equipment Company
(off-highway components
and construction machinery
manufacturing)
William P. Johnson 54 Chairman and Chief 1996 729 -
Executive Officer,
Goshen Rubber Co., Inc.
(rubber and plastic parts
manufacturer); Director,
Coachman Industries, Inc.
Richard J. Pfeil 64 President & Chairman, 1971 26,390 -
Koontz-Wagner Electric
Company, Inc. (electrical
equipment installer and
supplier)
<CAPTION>
DIRECTORS CONTINUING IN OFFICE
Terms Expiring in April, 1998
<C> <C> <S> <C> <C> <C>
Philip J. Faccenda 67 President, Bear Financial, 1983 702,004 4.46%
Inc. (venture capital); Vice
President and General
Counsel Emeritus,
University of Notre Dame;
Director, Hilb, Rogal &
Hamilton
Daniel B. Fitzpatrick 39 Chairman, President, 1995 14,536 -
Chief Executive Officer
and Director, Quality
Dining, Inc. (quick
service and casual dining
restaurant operator)
3
<PAGE> 6
<CAPTION>
Beneficial Ownership
of Equity Securities<F1>
------------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation<F3> Assumed Stock <F2> Class
- ---- --- ------------------------ ------- ---------- -----
<C> <C> <S> <C> <C> <C>
Leo J. McKernan 58 Former Chairman, Presi- 1989 4,693 -
dent and Chief Executive
Officer, Clark Equipment
Company (off-highway
components and construction
machinery manufacturing)
Dane A. Miller, Ph.D. 51 President, Chief Executive 1987 14,097 -
Officer and Director,
Biomet, Inc. (medical
products and technology)
<CAPTION>
Terms Expiring in April, 1999
<C> <C> <S> <C> <C> <C>
Lawrence E. Hiler 51 President, 1992 1,625 -
Hiler Industries, Inc.
(metal castings)
Rex Martin 45 Chairman, President and 1996 1,250 -
Chief Executive Officer,
NIBCO, Inc. (copper
and plastic plumbing parts
manufacturer)
Christopher J. Murphy III 50 President and Chief 1972 1,515,876 9.63%
<F4> Executive Officer,
1st Source Corporation
and 1st Source Bank;
Director, Comair, Inc.,
Quality Dining, Inc. and
Titan Holdings, Inc.
Ernestine M. Raclin 69 Chairman of the Board, 1976 5,064,927 32.18%
<F4> 1st Source Corporation
and 1st Source Bank;
Director, NIPSCO
<CAPTION>
NON-DIRECTOR EXECUTIVE OFFICERS
<C> <C> <S> <C> <C> <C>
Wellington D. Jones III 52 Executive Vice President, 103,368 -
1st Source Corporation
and 1st Source Bank
4
<PAGE> 7
<CAPTION>
Beneficial Ownership
of Equity Securities<F1>
------------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation<F3> Assumed Stock <F2> Class
- ---- --- ------------------------ ------- ---------- -----
<C> <C> <S> <C> <C> <C>
Richard Q. Stifel 55 Executive Vice President, 45,584 -
1st Source Bank
Vincent A. Tamburo 62 Senior Vice President, 37,563 -
General Counsel and Secre-
tary, 1st Source Corporation
and 1st Source Bank
Larry E. Lentych 50 Senior Vice President, 37,842 -
Treasurer and Chief Financial
Officer, 1st Source Corpo-
ration and 1st Source Bank
<S> <C> <C> <C>
All Directors and Executive Officers as a Group (16 persons) 6,848,542 43.52%
<FN>
<F1> Based on information furnished by the directors and executive officers
as of February 14, 1997.
<F2> The amounts shown include shares of Common Stock held directly or
indirectly in the following amounts by spouses and other family members of
the immediate households of the following directors, who disclaim beneficial
ownership of such securities: Christopher J. Murphy III, 1,088,040 shares;
Ernestine M. Raclin, 4,733,430 shares. Voting authority for 767,838 shares
owned beneficially by Mr. Murphy and 3,453,520 shares owned beneficially by
Mrs. Raclin is vested in 1st Source Bank as Trustee for various family
trusts. Investment authority for those shares is held by 1st Source Bank as
Trustee of the underlying trusts. Mr. Faccenda holds 678,067 shares in
fiduciary capacity as Trustee of two (2) trusts for the benefit of Mrs.
Raclin.
<F3> The principal occupation represents the employment for the last five
years for each of the named directors and executive officers. Directorships
presently held in other registered corporations are also disclosed.
<F4> Mr. Murphy is the son-in-law of Mrs. Raclin.
</TABLE>
Directors and officers of 1st Source and their associates were customers of
and had transactions with 1st Source and its subsidiaries in the ordinary
course of business during 1996; additional transactions are expected to take
place in the ordinary course of business in the future. All outstanding
loans and commitments were made 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. Credit
underwriting procedures followed were no less stringent than those for
comparable transactions with other borrowers.
5
<PAGE> 8
In 1987, 1st Source invested in a venture capital limited partnership after
a presentation made by it to 1st Source and a group of 1st Source customers,
directors and officers. As a result, 1st Source subscribed to a $500,000
limited partnership interest in the venture capital limited partnership for
its own account. As an accommodation to Director Raclin and former
directors Van E. Gates and Merlin J. Hanson, 1st Source subscribed to an
additional $250,000 limited partnership interest for their account. 1st
Source continues to own two-thirds (2/3) of this investment for its own
account, and one-third (1/3) for these persons. As of December 31, 1993,
the total $750,000 subscription has been paid, $250,000 of which has been
paid by the above-named persons.
During 1992, 1st Source subscribed to a $600,000 limited partnership
interest in a venture capital limited partnership for its own account. As
an accommodation to Director Raclin and former Director Gates, 1st Source
subscribed to an additional $150,000 limited partnership interest for their
account. 1st Source continues to own 80% of this investment for its own
account, and 20% for these persons. As of December 31, 1996, the total
$750,000 subscription has been paid, $150,000 of which has been paid by the
above-named persons. Each of these persons has paid to 1st Source, when
due, all amounts required to be paid by 1st Source, under the subscription
agreements for these persons' interest. 1st Source may engage in similar
transactions with its customers, directors and officers in the future.
BOARD COMMITTEES
1st Source and its major subsidiary, 1st Source Bank, share the following
permanent committees made up of board members of both organizations.
Executive, Audit, Human Resources and Executive Compensation Committee
members are appointed annually after the Annual Meeting of Shareholders.
Executive Committee - Members of the Executive Committee are Ernestine M.
Raclin, Chairman; Paul R. Bowles, Philip J. Faccenda, Daniel B. Fitzpatrick,
Christopher J. Murphy III, and Richard J. Pfeil. The committee met two (2)
times in 1996. The committee has the power to act for the Board of
Directors between Board meetings subject to certain statutory limitations.
The committee also carries out the functions of the Nominating Committee and
will consider nominees for election to the Board of Directors recommended by
Shareholders, if submitted in writing at least 120 days prior to the next
Annual Meeting to be held on or about April 22, 1998. Nominations should be
addressed to the attention of the Chairman, Executive Committee, c/o 1st
Source Corporation.
Audit Committee - Members of the Audit Committee are Paul R. Bowles,
Chairman; Rev. E. William Beauchamp, Philip J. Faccenda, William P. Johnson,
Rex Martin and Leo J. McKernan, 1st Source Directors; Anne M. Hillman, H.
Thomas Jackson, Craig A. Kapson and David L. Lerman, 1st Source Bank
Directors. The committee held four (4) meetings in 1996. The function of
the Audit Committee is to review the scope and results of the audits by the
internal audit staff and the independent accountants. The committee also
reviews the adequacy of the accounting and financial controls and presents
the results to the Board of Directors with respect to accounting practices
and internal procedures. It also makes recommendations for improvements in
such procedures.
Human Resources Committee - Members of the Human Resources Committee are John
T. Phair, 1st Source Bank Director, Chairman; Daniel B. Fitzpatrick,
Lawrence E. Hiler, JoAnn R. Meehan, Dane A. Miller and Richard J. Pfeil, 1st
Source Directors; Terry L. Gerber, Hollis E.
6
<PAGE> 9
Hughes, Jr., Mark D. Schwabero and Elmer H. Tepe, 1st Source Bank Directors.
The committee held four (4) meetings in 1996. The purpose of the committee is
to establish wage and benefit policies for 1st Source and its subsidiaries and
to approve individual salary and benefit plans for the senior officers of 1st
Source Bank.
Executive Compensation Committee - Members of the Executive Compensation
Committee are Philip J. Faccenda, Chairman; Paul R. Bowles and Richard J.
Pfeil. The committee held three (3) meetings in 1996. The Executive
Compensation Committee determines compensation for senior management
personnel, reviews the Chief Executive Officer and manages the company's
stock plans.
Meetings of the Board of Directors and Directors' Compensation - The Board of
Directors held five (5) meetings in 1996. Incumbent directors who attended
fewer than 75% of the aggregate total meetings of the Board of Directors and
all committees of the board of 1st Source on which they served were Rev. E.
William Beauchamp, Daniel B. Fitzpatrick and Rex Martin. Directors receive
fees in the amount of $6,000 per year, and $350 per board meeting and
committee meeting attended. Committee chairpersons receive $400 per
meeting. Total fees paid in 1996 were $117,550.
REMUNERATION OF EXECUTIVE OFFICERS
The following tables set forth all aggregate remuneration accrued by 1st
Source and its subsidiaries for 1996 for 1st Source's chief executive
officer and each of 1st Source's other four most highly compensated
executive officers.
7
<PAGE> 10
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Long-Term
Compensation Compensation
------------------------------------------- -------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position Year Salary Bonus<F2> Compensation Options (#Sh) Payouts<F2> Compensation<F3>
- --------------------------- ---- ------ --------- ------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ernestine M. Raclin 1996 $ 258,462 - $ 7,500 - - $13,080
Chairman of the Board 1995 250,000 - 7,000 - - 13,594
1st Source and 1st Source Bank 1994 240,769 - 7,000 - - 12,677
Christopher J. Murphy III <F1> 1996 389,077 $105,300 24,114 44,250 $169,936 13,080
President & CEO 1995 368,082 156,684 19,550 - 153,915 13,594
1st Source and 1st Source Bank 1994 345,855 100,000 19,617 27,908 116,884 12,677
Wellington D. Jones III 1996 188,500 33,750 6,633 17,125 55,805 13,080
Executive Vice President 1995 176,770 50,985 5,152 - 51,831 13,594
1st Source and 1st Source Bank 1994 166,280 30,211 5,461 14,470 44,818 12,677
Richard Q. Stifel 1996 144,154 12,000 4,869 12,250 36,185 13,080
Executive Vice President 1995 136,820 32,399 3,742 - 32,475 13,527
1st Source Bank 1994 128,889 21,093 3,912 10,855 27,739 12,447
Vincent A. Tamburo 1996 125,462 12,000 1,199 1,875 25,323 12,198
Senior Vice President, 1995 121,221 17,569 1,077 - 22,648 11,755
General Counsel and Secretary 1994 115,250 15,456 1,061 - 16,911 10,766
1st Source and 1st Source Bank
8
<PAGE> 11
<FN>
<F1> Mr. Murphy's Employment Agreement (the "Agreement") provides for a
$300,000 base salary, with annual increases of not less than 5% and cash
bonus payments based on a formula which is computed in a manner similar to
the awards to executives under the Executive Incentive Plan and Long-Term
Executive Award Program. The Agreement was amended in February 1997 to
permit gross-up payments necessary to cover possible excise tax payments by
Mr. Murphy and to reimburse Mr. Murphy for legal fees that might be expended
in enforcing Agreement provisions or contesting tax issues relating to the
Agreement's parachute provisions. The Agreement is a five-year contract which
is extended from year to year unless either party gives notice not to
extend. In the event of his disability, the Agreement terminates and Mr.
Murphy will receive his base salary for up to one year, in addition to other
disability programs in effect for all officers of 1st Source. In the event
of his death, 1st Source shall pay to the estate or other designated
beneficiary a death benefit equal to three times his base salary and bonus
paid in the preceding year, in addition to life insurance benefits. If Mr.
Murphy terminates his employment because of any adverse change in his status
as President or Director, resulting in a diminution of his duties, he shall
continue to receive his base salary for a period of twelve months after such
termination. If Mr. Murphy's employment terminates within one year of a
change in control (which term includes any third party which becomes
beneficial owner of 20% or more of the outstanding stock of 1st Source or
any approval of any transaction which results in a disposition of
substantially all of the assets of 1st Source), he shall receive severance
pay in cash equal to 2.99 times his "Annualized Includable Compensation" (as
defined under the Internal Revenue Code). The Agreement also contains
restrictive covenants which provide, among other things, that Mr. Murphy not
compete with 1st Source in bank or bank-related services for a twelve-month
period, within certain designated counties of Indiana, after his termination
of employment.
<F2> 1st Source has an Executive Incentive Plan (the "Plan") which is
administered by the Executive Compensation Committee (the "Committee") of
the Board. Awards under the Plan consist of cash and "Book Value" shares of
Common Stock. "Book Value" shares are awarded annually on a discretionary
basis and are subject to forfeiture over a period of five (5) years. The
Plan 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.
During February 1996 and March 1991, 1st Source granted special
long-term incentive awards (the "Awards") to participants in the Executive
Incentive Plan administered by the Committee. The 1996 Award was granted
for the attainment of the company's long-term goals for 1995 which were set
in 1990. The 1991 Award was granted for the attainment of the company's
long-term return on assets goal for 1990, set in 1986. Both Awards were split
between cash and 1st Source Common Stock valued at the market price at the
time of the award. Such shares are subject to forfeiture over a period of
ten (10) years. The first 10% of these shares was vested at the grant of
the Award. Subsequent vesting requires (i) the participant to remain an
employee of 1st Source and (ii) that 1st Source be profitable on an annual
basis based on the determination of the Committee.
1st Source also has a Restricted Stock Award Plan (the "Restricted
Plan") for key employees. Awards under the Restricted Plan are made to
employees recommended by the Chief Executive Officer and approved by the
Committee. Shares awarded under the Restricted Plan are subject to
forfeiture over a ten (10) year period. Vesting is based upon meeting
certain criteria, including continued employment by 1st Source.
9
<PAGE> 12
The bonus amounts represent the annual cash awards under the Plan. Vested
stock under the Plan, the Awards and the Restricted Plan is included in the
LTIP column. The value placed on "Book Value" shares is the book value per
share as of December 31 of each year. The value placed on market value
shares is market value as of December 31 of each year. Mr. Murphy receives
this vested amount in cash.
Unvested stock holdings under the Plan, the Awards and the Restricted
Plan as of December 31, 1996 are as follows:
<CAPTION>
Book Value Market Value Calculated
Name Shares Shares Value
- ---- ------ ------ -----
<S> <C> <C> <C>
Christopher J. Murphy III 31,013 12,778 $589,684
Wellington D. Jones III 9,789 4,000 185,483
Richard Q. Stifel 5,644 2,495 110,624
Vincent A. Tamburo 3,316 950 54,935
<F3> All amounts reported in the "All Other Compensation" column represent
1st Source contributions to defined contribution retirement plans.
</TABLE>
<TABLE>
EXECUTIVE INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<CAPTION>
Number of Performance
Book Value Period Until
Name Shares<F1> Payout<F2>
---------- ----------
<S> <C> <C>
Christopher J. Murphy III 9,590 5 years
Wellington D. Jones III 3,074 5 years
Richard Q. Stifel 1,093 5 years
Vincent A. Tamburo 1,093 5 years
<FN>
<F1> Mr. Murphy will receive his vested awards in cash.
<F2> Vesting of awards is tied to 1st Source achieving a 9% annual increase
in net income over the next five years. Twenty percent (20%) of the award
vests each year based on attaining the performance.
</TABLE>
PENSION PLAN BENEFITS
Annual pension benefits payable to executive officers under annuity
contracts received from the terminated Pension Plan are as follows:
<TABLE>
<CAPTION>
Annual Pension
Name Benefits
---- --------
<S> <C>
Ernestine M. Raclin $11,226
Christopher J. Murphy III 17,078
Wellington D. Jones III 6,694
Richard Q. Stifel 3,879
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During 1996, Mr. Murphy served as a member of the compensation committee of
Quality Dining, Inc. Director Fitzpatrick is an executive officer of
Quality Dining, Inc.
10
<PAGE> 13
EXECUTIVE COMPENSATION COMMITTEE REPORT
1st Source officers are reviewed once a year by their immediate supervisor.
The review covers a variety of management and professional characteristics
and performance relative to individual, group, and company goals.
The performance review is an integral part of 1st Source's Salary
Administration Program. All positions are rated and placed in a salary
range. Annually, with our approval, management establishes a salary
performance grid that sets the range of merit increases that may be given to
officers depending on their review and their respective position (lower,
middle or upper third) in their respective salary range.
The categories of performance under the Company's review program are:
* Substantially and consistently exceeds job requirements;
* Often exceeds job requirements;
* Meets and sometimes exceeds job requirements;
* Meets some job requirements, improvement is required; and
* Does not meet minimal job requirements.
Management awards salary increases as determined under the guidelines of the
Salary Administration Program in conformance with the salary performance
grid and the annual budget.
All of the officers reported herein, including Mr. Murphy, are under the 1st
Source Salary Administration Program. In his case, he is evaluated by us
against a series of objectives set in the Company's annual budget plan and
in its long-term strategic plan as annually approved by our full Board. We
reviewed Mr. Murphy's salary in September 1996. We reviewed his performance
relative to achieving 1995's goals and his progress toward 1996's. The
Company had exceeded its quantitative objectives in 1995 and met most of its
qualitative objectives as well. We determined that Mr. Murphy's performance
"often exceeds job requirements" and he was therefore eligible to receive a
4% to 6% base salary increase.
In addition to using the Company's Salary Administration Program, we
compared Mr. Murphy's compensation, both base salary and bonus, with
compensation levels for CEO's of bank holding companies of comparable size
and performance in the Midwest and nationally. We reviewed compensation
comparisons and bank performance data prepared by Ben S. Cole Financial
Corporation, the Bank Administration Institute, Sheshunoff and Company,
Wyatt Company, and the Indiana Bankers Association. Based on these factors,
we increased Mr. Murphy's base salary 6% in September 1996.
Bonuses under 1st Source's Executive Incentive Plan 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 performance relative to weighted
objectives set at the beginning of the year. In Mr. Murphy's case, the base
bonus calculation is 20% of his salary. 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%.
Once the base bonus is calculated, an officer can receive 100% to 300% of
the amount depending on their individual performance. As with all Executive
Incentive Plan participants, the reviewer assesses performance relative to
an agreed upon set of objectives. In Mr. Murphy's case, these are the
annual business objectives and the Company's long-term goals as approved by the
Board. In 1996, the Company expanded its branch network, generally exceeded
its annual financial and credit quality goals and generally met its
qualitative goals. Accordingly, Mr. Murphy was awarded a bonus of $210,600
for 1996's performance.
11
<PAGE> 14
Under the Company's Executive Incentive Plan, 50% of this bonus will be paid
in cash in March 1997 to Mr. Murphy. The other 50% is subject to forfeiture
over the next five (5) years. The forfeiture lapses ratably for each year
Mr. Murphy remains with the Company and for each year or period of years the
Company grows its net income by a minimum of 9% per year. During this
period, the "at risk" portion of the bonus is delineated in book value stock
but is paid in cash to Mr. Murphy as the forfeiture lapses. The Company's
Executive Incentive Program limits bonuses, at time of award, to 75% of
salary.
EXECUTIVE COMPENSATION COMMITTEE
Philip J. Faccenda, Chairman
Paul R. Bowles
Richard J. Pfeil
12
<PAGE> 15
<TABLE>
OPTIONS GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants
(a) (b) (c) (d) (e) (f)
Number of % of Total
Securities Options
Underlying Granted to Exercise Grant
Options Employees Price Expiration Date
Name Granted <F1> in Fiscal Year ($/Share) Date Value<F2>
- ---- ------------ -------------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Christopher J. Murphy III <F3> 44,250 30% $16.60 7/31/2006 $281,076
Wellington D. Jones III 17,125 12 16.60 7/31/2006 108,778
Richard Q. Stifel 12,250 8 16.60 7/31/2006 77,812
Vincent A. Tamburo 1,875 1 16.60 7/31/2006 11,910
<FN>
<F1> The dates these options may first be exercised are as follows:
<CAPTION>
7/31/97 7/31/98 7/31/99 7/31/2000 7/31/2001
------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C>
Christopher J. Murphy III 8,850 8,850 8,850 8,850 8,850
Wellington D. Jones III 1,250 5,500 3,525 3,425 3,425
Richard Q. Stifel 2,450 2,450 2,450 2,450 2,450
Vincent A. Tamburo 1,875
Options are subject to a three-year holding period after exercise.
<F2> Grant date values have been determined using the Black-Scholes option
pricing model. The assumptions used in calculating the Black-Scholes present
value for these grants were as follows: dividend yield of 1.54%; expected
volatility of 24.25%; risk-free interest rate of 6.60%; and expected life of
8.43 years.
<F3> Mr. Murphy will receive reimbursement for income taxes due, as well as
the income taxes due upon the reimbursement, when he exercises these
options.
</TABLE>
13
<PAGE> 16
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1996 OPTION VALUES
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options at Options at
December 31, 1996 December 31, 1996
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Murphy III - - 357,972 44,250 $4,518,384 $132,750
Wellington D. Jones III - - 72,436 23,533 973,220 100,249
Richard Q. Stifel - - 36,179 16,230 326,338 76,341
Vincent A. Tamburo - - 5,426 1,875 46,975 5,625
</TABLE>
14
<PAGE> 17
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN<F1>
AMONG 1ST SOURCE, NASDAQ MARKET INDEX
AND PEER GROUP INDEX<F2>
[GRAPH]
<CAPTION>
31-Dec-91 31-Dec-92 31-Dec-93 31-Dec-94 31-Dec-95 31-Dec-96
<S> <C> <C> <C> <C> <C> <C>
1st Source 100 153 156 184 261 290
NASDAQ Index 100 101 121 127 165 205
Peer Group 100 129 135 126 183 243
<FN>
<F1> Assumes $100 invested on December 31, 1991 in 1st Source Corporation common stock, NASDAQ market index, and
peer group index.
<F2> The peer group is a market-capitalization weighted stock index of banking companies in Indiana, Illinois, Michigan,
Ohio and Wisconsin.
NOTE: Total return assumes reinvestment of dividends.
</TABLE>
15
<PAGE> 18
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.
PROPOSAL NUMBER 2
APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
AND THE OFFERING OF 200,000 SHARES OF 1ST SOURCE
COMMON STOCK UNDER THE PLAN
On February 19, 1997, the Executive Committee, acting on behalf of the
Board of Directors, approved the 1997 Employee Stock Purchase Plan (the
"1997 Plan") and the offering of 200,000 shares of 1st Source Common Stock
thereunder. The 1997 Plan becomes effective June 1,1997, subject to approval
by the shareholders. The affirmative vote of a majority of a quorum entitled
to vote at the meeting is required to approve the 1997 Plan.
A maximum of 200,000 shares of 1st Source Common Stock may be sold to
employees under the 1997 Plan. The first offering under the 1997 Plan will
allow all eligible employees to purchase up to 65,000 shares on or before May
31, 1999.
Any employee who works for either 1st Source or a subsidiary of 1st Source
and has been permanently employed (full or part time) with at least two (2)
years of service on the effective date of an offering, with a customary
working schedule of at least 20 hours per week, and who customarily works
five (5) or more months in a calendar year, is eligible to participate.
Eligible employes may purchase any dollar amount of stock, so long as such
amount is not more than 25% of his base rate of pay. No employee's purchase
rights may accrue under the 1997 Plan and any future employee stock purchase
plans of 1st Source or its subsidiaries at a rate that exceeds $25,000 worth
of stock in any calendar year.
No director, nominee, or executive officer set forth on page 2 herein, or
any associate thereof, is eligible to participate in the 1997 Plan.
No employee is eligible to participate if, after the grant of the option,
he owns or has a right to purchase more than 5% of the value or of the voting
power of all classes of 1st Source stock.
The 1997 Plan provides for payment for the stock through payroll deductions
over the period of the offering. 1st Source will make no contribution to the
1997 Plan. Payroll deductions must be deposited into the employees' savings
accounts. Employees may discontinue the deductions at any time and exercise the
option to take the funds out of the program. All stock under the initial 1997
Plan offering must be purchased by May 31, 1999.
The purchase price of the stock to be issued under the first offering will
be 100% of market price at June 1, 1997, the offering date.
The 1997 Plan will be administered by a committee of not less than three (3)
members of 1st Source's Board of Directors, none of whom is eligible to
participate in the 1997 Plan. The members will be appointed by 1st Source's
Board of Directors. The committee determines the eligibility of participants,
the maximum number of shares to be offered under such offering, and the market
price of the shares to be offered.
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<PAGE> 19
There are no federal tax consequences resulting from the purchase of stock
under the 1997 Plan. Under current law, upon the sale of any shares purchased
under the 1997 Plan within one year of the purchase, or prior to the termination
of a current offering, the difference between the market value of the stock
on the day it was purchased and the amount the employee paid for the stock is
treated as compensation. The difference between the sales price of the stock
and the market value on the day of purchase must be reported on the
employee's tax return as a capital gain.
There are no employer imposed restrictions on the sale of the stock by the
employees enrolled in the 1997 Plan.
The 1997 Plan shall have no expiration date. A copy of the 1997 Plan is
attached hereto as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF
THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NUMBER 3
AMENDMENT OF SECTIONS 2 AND 3 OF 1ST SOURCE CORPORATION
1992 STOCK OPTION PLAN
On February 19, 1997, the Executive Committee, acting on behalf of the
Board of Directors, unanimously approved an amendment to the 1st Source
Corporation 1992 Stock Option Plan (the "1992 Plan") in order to exempt 1992
Plan benefits from the $1 million deductibility limitation, as provided under
Section 162(m) of the Internal Revenue Code of 1986, as amended. The amendment
becomes effective upon shareholder approval. The affirmative vote of a majority
of the issued and outstanding shares of 1st Source Common Stock entitled to
vote at the meeting is required to approve the amendments to the 1992 Plan.
The 1992 Plan amendment includes:
(1) The total number of shares that may be granted under the 1992 Plan to any
employee during any calendar year shall not exceed 100,000 shares.
(2) The 1992 Plan shall be administered by the Executive Compensation
Committee of the Board of Directors, each of whom shall be disinterested
directors, defined as "non-employee" directors under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, and "outside directors" under
Section 162(m) of the Internal Revenue Code of 1986, as amended.
A copy of the full text of the amendment to the 1992 Plan is attached hereto
as Exhibit B.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE IN FAVOR OF
THE AMENDMENT TO THE 1ST SOURCE CORPORATION 1992 STOCK OPTION PLAN.
17
<PAGE> 20
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of 1st Source are audited annually by independent
accountants. For the year ended December 31, 1996, and the seven (7)
preceding years, the audit was performed by Coopers & Lybrand, South Bend,
Indiana. Representatives of the firm of Coopers & Lybrand 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 plans to select its independent accountants for
the year ending December 31, 1997 in July 1997.
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 6, 1997.
ADDITIONAL INFORMATION
As to the proposals presented for approval, a plurality of the shares voted
is required for approval.
COPIES OF 1ST SOURCE'S MOST RECENT FORM 10K WILL BE PROVIDED, WITHOUT
CHARGE, ON WRITTEN REQUEST TO: TREASURER, 1ST SOURCE CORPORATION, POST
OFFICE BOX 1602, SOUTH BEND, INDIANA 46634.
A copy of 1st Source's Annual Report is furnished herewith to Shareholders
for the calendar year ended December 31, 1996, containing financial
statements for such year. The financial statements and the Report of
Independent Accountants are incorporated by reference in this Proxy
Statement.
By order of the Board of Directors,
Vincent A. Tamburo
Secretary
Dated March 14, 1997
18
<PAGE> 21
EXHIBIT A
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. This Employee Stock Purchase Plan (the "Plan") of 1st
Source Corporation (the "Corporation") is designed to encourage employee
purchases of shares of the Corporation's Common Stock by offering to eligible
employees the right to purchase such shares. The Plan is intended to apply to
the Corporation and to such subsidiaries of the Corporation as the Plan
Administrative Committee may from time to time designate (including
subsidiaries which become such subsequent to the effective date of the Plan);
provided, however, that the Plan shall only apply to such subsidiaries of the
Corporation as are defined in Section 425(f) of the Internal Revenue Code of
1986, as amended.
The Corporation intends that the Plan shall qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code
of 1986, as amended, and the Plan shall be construed in a manner consistent
with the requirements of said Section 423.
2. Administration. The Plan shall be administered by a committee
appointed by the Board of Directors of the Corporation (the "Committee"). The
Committee shall consist of not less than three (3) members of the
Corporation's Board of Directors. The Board of Directors may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board of Directors. No
member of the Committee shall be eligible to participate in the Plan.
Subject to the express provisions of the Plan and such
instructions and limitations as the Board of Directors of the Corporation may
establish from time to time, the Committee shall be authorized to develop
guidelines regarding the Plan; to publish, amend, and rescind rules and
regulations relating to the Plan; to administer and interpret the Plan as may
be required from time to time; and to take all other actions and make all
other determinations necessary for the administration of the Plan. Decisions
of the Committee shall be made by a majority of its members and shall be
final, conclusive and binding upon all participants in the Plan. Any decision
reduced to writing and signed by a majority of the members of the Committee
shall be fully effective as if it had been made at a meeting of the Committee
duly held. The Corporation will pay all expenses incurred in the
administration of the Plan.
Subject to the approval of the Board of Directors of the
Corporation, the Committee shall have the right to suspend, discontinue or
cancel the Plan, on either a temporary or permanent basis, as the Committee
may from time to time deem appropriate and for such reasons as the Committee
in its sole judgment may deem appropriate; provided, however, the Committee
may not suspend, discontinue or cancel the Plan during an offering period
with respect to purchase rights then outstanding. No provision of the Plan
shall be deemed to grant to any employee or his legal representatives or
assigns any right to participate in the Plan except as expressly set forth
herein or as provided in such interpretations or decisions as the Committee
may from time to time issue in accordance with the provisions of the Plan.
No member of the Board of Directors or the Committee shall be
liable for any action or determination with respect to the Plan or any option
granted under it which does not involve recklessness or willful misconduct.
3. Stock Subject to Plan and Adjustment. Shares offered hereunder
(hereinafter referred to as "Common Stock") may be authorized but unissued
Common Stock of the Corporation or previously issued Common Stock acquired by
the Corporation and held in its treasury. Not more than two hundred thousand
(200,000) shares of the Common Stock of the Corporation (as said
19
<PAGE> 22
amount may be adjusted in accordance with Paragraph 9 hereof) shall be sold in
the aggregate hereunder. Shares not actually purchased under an offering may be
offered again in a subsequent offering.
4. Offerings. Purchase rights shall be granted under the Plan in one
or more offerings, as the Committee may determine, but the maximum number of
shares of Common Stock which shall be subject to purchase rights hereunder
during any offering period shall be sixty-five thousand (65,000) shares (as
said amount may be adjusted in accordance with Paragraph 9 hereof).
The terms of each offering shall specify the number of shares of
Common Stock which may be subject to purchase rights thereunder, and, subject
to Paragraph 6, each offering shall bear a uniform relationship to the basic
rate of pay of the eligible employees on the effective date of the offering.
("Basic rate of pay" shall mean either the salary of an employee or such
employee's hourly, weekly, or other periodic rate of pay on an annualized
basis including vacation, holiday and sick pay, but excluding overtime, shift
differentials, commissions, bonuses, deferred compensation, and fringe
benefits.)
Purchase rights shall be granted solely to eligible employees,
and shall expire at the close of the offering period (as hereinafter
defined).
No offering of Common Stock under the Plan may be made prior to
June 1, 1997. The effective date of an offering shall be the date determined
by the Committee and specified in the communication of the offering by the
Corporation.
Purchase rights shall be granted to all eligible employees of the
Corporation or of a subsidiary of the Corporation whose employees are granted
any of such rights in an offering, and (subject to this Paragraph and
Paragraph 6 hereof) all employees granted rights shall have the same rights
and privileges under the offering; provided, however, that under rules
prescribed by the Committee, no employee will be granted a purchase right:
(a) if immediately after the right is granted, the employee owns (as
defined in Sections 423 and 425(d) of the Internal Revenue Code of 1986, as
amended) stock, and/or holds outstanding purchase rights to purchase stock,
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Corporation or of any subsidiary of the
Corporation; or,
(b) the grant of any purchase right permits the employee's rights to
purchase stock under this Plan and under all other employee stock purchase
plans, if any, of the Corporation or its subsidiaries, to accrue at a rate
which exceeds Twenty-Five Thousand Dollars ($25,000.00) of fair market value
of such stock (determined at the time such purchase right is granted) for
each calendar year in which such purchase right is outstanding at any time; or
(c) if at any time the grant of such purchase right is prohibited by
applicable law or will cause the Plan not to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended.
5. Eligible Employees. An eligible employee is an employee who, on
the effective date of an offering, has been an employee of the Corporation or
one of the Corporation's subsidiaries (designated by the Committee on the
effective date of such offering as a participating subsidiary) for at least
two years preceding the effective date of such offering; whose customary
employment is twenty (20) hours or more per week; and whose customary
employment is for five (5) months or more in any calendar year.
20
<PAGE> 23
6. Provisions of Offerings. The provisions and related conditions of
each offering hereunder shall be determined by the Committee, subject to the
provisions of the Plan and the following requirements:
(a) The Committee shall fix the purchase price of the shares to be offered
so that such price per share shall equal one hundred percent (100%) of the
fair market value of a share of the Corporation's Common Stock on the
effective date of the offering. The purchase price so fixed shall be the
purchase price per share to be paid by a participant for all shares purchased
by the participant during the offering period. The "fair market value" of the
Corporation's Common Stock shall be determined by the Committee under any
reasonable valuation method permitted under the applicable provisions of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
thereunder.
(b) The "offering period" shall be that period of time fixed by the
Committee, but not to exceed twenty-seven (27) months following the effective
date of the offering.
(c) The "entry period" shall be that period of time commencing not earlier
than ninety (90) days prior to the effective date of the offering during
which appropriate participation and payroll deduction forms shall be
distributed to eligible employees along with such other documents as may be
required, and during which such eligible employees shall have the right to
elect to participate in the Plan by completing, signing, and returning such
forms to the Committee not later than the close of business on the last
business day prior to the effective date of the offering. Participation and
payroll deduction forms not received by the Committee prior to the close of
business day prior to the effective date of the offering shall not be
accepted for participation in the offering made by the Corporation.
(d) The "payroll deduction period" shall be that period within which
electing participants shall make, through payroll deductions, the required
payments for the shares of the Corporation's Common Stock which said
participants have elected to purchase. The payroll deduction period shall
commence on or after the effective date of an offering, shall terminate not
later than the expiration of the offering period, and shall be fixed for each
offering by the Committee.
(e) Each participant shall indicate on the Plan participation and/or
payroll deduction forms the amount which said participant desires to be
withheld from his compensation during the offering period and applied to the
purchase of shares of the Corporation's Common Stock; provided, however, the
total amount to be withheld and applied during an offering period for any
individual participant may not exceed twenty-five percent (25%) of such
participant's annual basic rate of pay determined as of the effective date of
the offering by the Committee.
(f) A participant shall be granted the right to purchase a fixed number of
whole shares of Common Stock of the Corporation, which fixed number shall be
determined by the Committee as of the effective date of the offering by
dividing the total amount expected to be credited to such participant's
payroll deduction account (as defined in subparagraph 6(g) hereof) (including
payroll deductions and accrued interest thereon), based upon his actual rate
of participation as indicated on his participation and payroll deduction
forms, by the purchase price per share as determined by the Committee under
subparagraph 6(a) hereof.
21
<PAGE> 24
(g) The participant, in his participation and/or payroll deduction forms,
shall authorize the Corporation or the participating subsidiary, as the case
may be, to withhold from his compensation, throughout the offering period,
the amount which said participant indicated he desired to be withheld and
applied to the purchase of shares of the Common Stock of the Corporation (in
accordance with subparagraph 6(e) hereof). The participant, in his
participation and/or payroll deduction forms, shall direct the Corporation or
the participating subsidiary, as the case may be, to deposit such withheld
amounts in a savings account (herein referred to as a "payroll deduction
account") to be opened for the employee with 1st Source Bank, South Bend,
Indiana, or any successor bank to that institution (hereinafter called the
"Bank") pursuant to directions set forth in said participation and/or payroll
deduction forms. The employee shall further agree in the participation and/or
payroll forms that he shall only withdraw and be paid the funds so
accumulated in said payroll deduction forms.
If required by local law or regulation, payroll deduction accounts may
be opened at foreign branches of the Bank, or at other banks approved by the
Corporation; such payroll deduction accounts shall be maintained and bear
interest in accordance with local practice.
7. Termination and Exercise of Purchase Rights. A participant may
elect by written notice furnished to the Committee at least thirty (30) days
prior to the expiration of an offering period:
(a) To cancel his participation and receive all payroll deductions and
accrued interest in said participant's payroll deduction account as soon as
practicable following such notice or as soon as practicable following
expiration of the offering period, as he may elect. Upon receipt of a notice
of cancellation by the Committee, the participant's purchase rights shall
immediately lapse, and no further payroll deduction shall be made from his
pay during the offering period. Partial withdrawals of payroll deductions may
not be made.
(b) To discontinue further payroll deductions and have the balance in his
payroll deduction account applied as of the expiration of the offering period
to the purchase of the maximum number of whole shares of Common Stock as may
then be purchased, subject to the applicable limitations under subparagraph
6(f) hereof, in which event his purchase rights shall be permitted to lapse
to the extent consistent with his election.
(c) To elect to purchase on the last business day of the month following
the date of his written notice under this Paragraph 7, all or fewer than all
of the shares of which said participant is entitled to purchase under the
offering as provided in subparagraph 6(f) hereof. Payment for said shares of
Common Stock so purchased shall be made by the application of the balance of
said participant's payroll deduction, account plus the payment of cash or
certified check, if necessary. Said payment shall be delivered to the
Committee or a representative thereof on the last business day of the month
following said participant's written notice. As soon as practicable following
the participant's purchase of shares in accordance with this subparagraph
7(c), the balance in said participant's payroll deduction account, if any,
shall be paid to said participant.
Unless a participant gives timely, written notice as provided
under this Paragraph 7 or unless the employment of said participant is
terminated prior to the expiration of an offering period, said participant's
purchase rights shall be exercised as of the expiration of the offering
period for the purchase of that number of whole shares of Common Stock which
can be purchased with the balance in his payroll deduction account.
22
<PAGE> 25
As soon as practicable after a participant's purchase of shares
under this Paragraph 7, the Committee shall cause certificates for the number
of shares of the Corporation's Common Stock purchased hereunder to be issued
to said participant, or the estate, personal representative or beneficiaries
of a deceased participant, as fully paid and non-assessable shares, and shall
refund any unused balance remaining in such participant's payroll deduction
account.
8. Termination of Employment.
(a) In the event that the employment by the Corporation or a participating
subsidiary of an employee who was a participant under the Plan shall
terminate other than by reason of said participant's death prior to the
expiration of an offering period and prior to said participant making an
election under Paragraph 7 hereof, said participant shall have the right
within thirty (30) days from the date of said termination (unless the
expiration of the offering period shall first occur, in which event such
right may be exercised only on or prior to the expiration of said offering
period) to elect to purchase, by written notice to the Committee, all or
fewer than all of the shares said participant is entitled to purchase under
the offering as provided in subparagraph 6(f) hereof. Payment for said shares
of Common Stock shall be made by the application of the balance of said
participant's payroll deduction account plus the payment of cash or certified
check, if necessary. Said payment shall be delivered to the Committee or a
representative thereof on the date of said participant's written notice of
election under this subparagraph 8(a). As soon as practicable following the
payment for shares under this subparagraph 8(a), the balance in said
participant's payroll deduction account, if any, shall be paid to said
participant.
(b) In the event that the employment by the Corporation or a participating
subsidiary of an employee who is a participant under the Plan shall terminate
prior to the expiration of an offering period by reason of such employee's
death, his estate, personal representative, or beneficiary shall have the
right, at any time within ninety (90) days from the date of his death (unless
the expiration of the offering period shall first occur, in which event such
right may be exercised only on or prior to the expiration of the offering
period), to elect by written notice delivered to the Committee to purchase
all or fewer than all of the shares of the Common Stock which said deceased
participant was entitled to purchase under the offering as provided in
subparagraph 6(f) hereof. Payment for said shares of Common Stock shall be
made by the application of the balance of said participant's payroll
deduction account plus the payment of cash or certified check, if necessary.
Said payment shall be delivered to the Committee or a representative thereof
on the date of the written notice given under this subparagraph 8(b). As soon
as practicable following the payment for shares under this subparagraph 8(b),
the balance in said deceased participant's payroll deduction account, if any,
shall be paid to said estate, personal representative or beneficiary.
(c) In the event that the employment by the Corporation or a participating
subsidiary of an employee who was a participant under the Plan shall
terminate for any reason, including death, and, said participant or the
estate, personal representative or beneficiary of said participant shall not
make an election by written notice in accordance with the provisions of
subparagraphs 8(a) or 8(b) hereof, then, such participant's purchase rights
shall, with respect to such offering period, automatically lapse, and the
Committee shall cause the balance of such participant's payroll deduction
account to be paid to him or to his estate, personal representative or
beneficiary as soon as practicable.
23
<PAGE> 26
(d) As soon as practicable after a participant or a participant's estate,
personal representative or beneficiary's purchase of shares under this
Paragraph, the Committee shall cause certificates for the number of shares of
the Corporation's Common Stock purchased hereunder to be issued to said
participant or said participant's estate, personal representative or
beneficiaries fully paid and non-assessable shares.
9. Adjustments in Capital Structure. In the event that the
outstanding shares of the Common Stock of the Corporation shall be increased
or decreased or changed into or exchanged for a different number or kind of
shares of stock or other securities, whether through reorganization,
recapitalization, stock split-up, combination of shares, stock dividend,
merger, consolidation or any other change in corporate structure affecting
the Common Stock of the Corporation, appropriate adjustments shall be made by
the Committee in the number and kind of shares or other securities available
for purchase hereunder and subject to any purchase rights then outstanding,
and/or the purchase price thereof. Any determination by the Committee of any
adjustment to be made in any contingency under this Paragraph, along with
such other action as the Committee shall deem appropriate under the
circumstances, shall be final.
10. Merger or Liquidation. In the event of a dissolution or
liquidation of the Corporation, or a merger or consolidation in which the
Corporation is not the surviving corporation, the Plan shall terminate upon
the date of approval of such dissolution, liquidation, merger or
consolidation by the Corporation's shareholders. Unless a participant elects
to exercise his/her purchase rights as provided in Paragraph 7 at any time
prior to the date of approval by the shareholders of any dissolution,
liquidation, merger or consolidation, upon such termination, all purchase
rights under the Plan shall automatically lapse, and all payroll deduction
accounts shall be refunded with interest to the participants as soon as
practicable.
11. Non-Transferability of Rights. Purchase rights granted an
employee under the Plan are exercisable, during such employee's lifetime,
only by him; they may not be sold, transferred (other than by will or laws of
descent or distribution), pledged or otherwise disposed of or encumbered.
12. Rights as a Shareholder. An employee or his estate, personal
representative or beneficiary will have none of the rights and privileges of
a shareholder of the Corporation with respect to shares of Common Stock
subject to purchase rights under the Plan until certificates representing
such shares of Common Stock have been transferred or issued.
13. Status of Plan Funds. All amounts received by the Corporation
under the Plan may be used by the Corporation for any corporate purpose.
14. Governmental Regulations. The Corporation's obligation to sell
and deliver Common Stock under the Plan is subject to applicable laws and to
the approval of any governmental authority required in connection with the
authorization, issuance, sale or delivery of such Common Stock. In the event
any governmental agency having any jurisdiction over the Plan, the
qualification thereof or the shares of Common Stock to be issued thereunder
fails or refuses to qualify the Plan or objects thereto, the Corporation may
cause this Plan to be amended to conform with said governmental agencies
requirements or may terminate the same, in which event all payroll deduction
account balances shall be paid to employee participants.
15. Indemnification of Committee. The members of the Committee shall
be indemnified by the Corporation against all reasonable expenses incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal thereof, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with
24
<PAGE> 27
the Plan or any offering or purchase right, and against all amounts paid
by them in settlement thereof (provided such settlement is approved by
counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding. A member of the Committee
shall not be entitled to indemnification with respect to any matter or claim
arising out of recklessness or willful misconduct by such member in the
performance of his duties. As a condition of any indemnification, a Committee
member shall in writing offer the Corporation the opportunity, at its own
expense, to handle and defend any suit or claim against him.
16. Effective Date, Termination and Amendment. The Plan is subject to
the approval of the Corporation's shareholders within twelve (12) months
following adoption of the Plan by the Board of Directors of the Corporation;
and, if such approval is not received by such date, this Plan shall
terminate, and no employee shall have any rights hereunder except to receive
in cash the balance of his payroll deduction account including interest. The
Plan may be amended from time to time or terminated by the Committee and/or
the Board of Directors, provided that no such amendment or termination may
adversely affect the rights of any participant under any outstanding purchase
offering under this Plan, nor cause any purchase rights to fail to qualify
under Section 423 of the Internal Revenue Code of 1986, as amended, and
provided further that no such amendment may, without approval of the
shareholders of the Corporation, (a) increase the maximum number of shares to
be offered under the Plan (except as provided in Paragraph 9 hereof), (b)
reduce the purchase price specified in subparagraph 6(f) (except as provided
in Paragraph 9 hereof), (c) extend the term of offering periods under the
Plan, or (d) change the person or categories of persons eligible to
participate in the Plan specified in Paragraph 5 hereof.
17. Withholding. Any amounts to be paid or shares to be delivered by
the Corporation under the Plan shall be reduced by any sums required to be
withheld by the Corporation.
18. Tax Effect. There are no federal tax consequences resulting from
the purchase of stock under this Plan. Under current law, upon the sale of
any shares purchased under the Plan within one year of purchase, or prior to
the termination of a current offering, the difference between the market
value of the stock on the day it was purchased and the amount the employee
paid for the stock is treated as compensation. The difference between the
sales price of the stock and the market value on the day of purchase must be
reported on the employee's tax return as a capital gain. Separate information
and detailed examples will be provided by the Corporation to Plan participants
shortly after the employee election to participate is made. ANY PARTICIPANT
MUST INFORM THE CORPORATION IF SHARES ARE SOLD AS PROVIDED ABOVE.
19. Notice. Unless otherwise specifically provided herein, any notice
to be given to the Committee under the Plan shall be given in writing and
shall be deemed delivered for all purposes of the Plan if personally
delivered to a member of the Committee or mailed to such Committee addressed
to the Corporation by postpaid, certified United States mail.
20. Miscellaneous. The term "his" or "him" as used in the Plan shall
be deemed to refer to all eligible employees of the Corporation and
participants herein irrespective of gender or age.
The Plan shall be governed by the laws of the State of Indiana.
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EXHIBIT B
AMENDMENT TO 1ST SOURCE CORPORATION
1992 STOCK OPTION PLAN
Section 2 and 3 of the Company's 1992 Stock Option Plan are
amended in their entirety to read as follows:
2. Stock Subject to the Plan
The total number of shares of Common Stock of the Company that may be
optioned under the Plan is 500,000, as adjusted after the effective date
pursuant to Section 6. The total number of shares that may be granted under
the Plan to any employee during any calendar year shall not exceed 100,000
shares, as adjusted. Shares may consist, in whole or in part, of unissued
shares or treasury shares. If any shares that have been optioned cease to be
subject to option, they may again be optioned under the Plan. During the
period that any options granted under the Plan are outstanding, the Company
shall reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy all outstanding unexercised options.
3. Administration
The Plan shall be administered by the Executive Compensation Committee
of the Board of Directors, herein called the "Committee," each of whom shall
be a "non-employee director" as provided under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, and an "outside director" as provided under
Section 162(m) of the Internal Revenue Code of 1986, as amended. The
Committee shall have the authority, consistent with the Plan: (i) to select
the eligible employees to whom options shall be granted under the Plan; (ii)
to determine the terms and conditions of each option including but not
limited to the date of grant, the date(s) of exercise, the number of shares
of Common Stock subject to the option, and the restrictions, if any, to be
imposed upon the transfer of shares purchased pursuant to the option; (iii)
to prescribe the form of all stock option agreements and any other agreement
or document which the Committee determines is appropriate in connection with
the Plan; (iv) to prescribe rules and regulations for the administration of
the Plan; (v) to construe and interpret any provision of the Plan and any
option agreement or other agreement executed in connection with the Plan; and
(vi) to determine whether the option is an incentive stock option or a
nonstatutory stock option.
The Amendment shall become effective on the date the Amendment is approved
by a majority vote of the holders of the total outstanding Common Stock of
the Company.
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Ernestine M. Raclin, Christopher J. Murphy III,
and Vincent A. Tamburo 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 17, 1997 and at any and all adjournments
thereof.
1. ELECTION OF DIRECTORS.
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked to the contrary) all nominees listed below.
INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through or otherwise strike the nominee's name in the list below.
TERMS EXPIRE APRIL, 2000: Rev. E. William Beauchamp Paul R. Bowles
William P. Johnson Richard J. Pfeil
2. APPROVAL OF 1997 EMPLOYEE STOCK PURCHASE PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
4. SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT BEFORE THE MEETING.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
1st Source
Corporation
Post Office Box 1602
South Bend, Indiana 46634
<PAGE> 30
This Proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted for all nominees listed in Proposal 1 and for Proposals 2 and 3.
Please sign exactly as shares are registered. When shares are held by joint
tenants, both should sign. When signing as attorney, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign
in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
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Please mark, sign, date and return the Proxy
promptly using the enclosed envelope.
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Signature
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Signature If Held Jointly
Dated: , 1997
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<PAGE> 31
APPENDIX
Page 15 of the printed proxy contains a stock performance graph. The
information contained in that graph is put forth in a tabular format that
may be processed by EDGAR.
