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
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-12
Irwin Financial Corporation
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(Name of Registrant as Specified in Its Charter)
Irwin Financial Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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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Irwin Financial Corporation 500 Washington Street, Columbus, Indiana 47201
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March 29, 2002
Notice of Annual Meeting of Shareholders
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To the Shareholders:
The Annual Meeting of Shareholders of Irwin Financial
Corporation will be held at the Holiday Inn Conference Center,
2480 Jonathan Moore Pike, Columbus, Indiana, on Thursday,
April 25, 2002, at 4:00 p.m., Columbus time, for the following
purposes:
1. to elect three Directors to serve on the Board for three-year
terms;
2. to hear such reports as may be presented; and
3. to transact such other business as may properly come before
the meeting or any adjournment thereof.
Registration of shareholders will start at 3:15 p.m. and the
meeting will start at 4:00 p.m. Following the meeting,
refreshments will be served.
I encourage you to date, sign, and mail the enclosed proxy in
the postpaid envelope that is provided. If you are present at
the meeting and desire to do so, you may revoke your proxy and
vote in person.
Enclosed with this notice are our Annual Report to
Shareholders for 2001, our Annual Report on Form 10-K and
Proxy Statement.
Matt Souza, Secretary
Proxy Statement of Irwin Financial Corporation
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For Annual Meeting of Shareholders to be held April 25, 2002
General Information
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We are providing this proxy statement and the accompanying
form of proxy in connection with the solicitation by our Board
of Directors of proxies to be used at our Annual Meeting of
Shareholders on Thursday, April 25, 2002, at the Holiday Inn
Conference Center, 2480 Jonathan Moore Pike, Columbus,
Indiana, at 4:00 p.m., Columbus time, or any adjournment
thereof.
We will bear the costs of the solicitation of proxies in the
accompanying form. The solicitation of proxies will be limited
to the use of the mails.
A shareholder who signs and returns a proxy in such form will
have the power to revoke it at any time before it is exercised
by giving notice of revocation to our Secretary. All shares
represented by the accompanying proxy, if the proxy is
executed and returned, will be voted as directed by the
shareholder. If a shareholder executes and returns a proxy,
but makes no direction as to such shareholder's vote, then the
shares will be voted on each matter to come before the meeting
in accordance with the recommendation of the Board of
Directors.
Our main offices are located at 500 Washington Street,
Columbus, Indiana 47201.
This proxy statement will be mailed to shareholders on or
about March 29, 2002.
1.
Voting Securities and Principal Holders
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Only shareholders of record at the close of business on March
11, 2002, will be entitled to vote. On March 11, 2002, there
were 27,534,021 common shares outstanding and entitled to
vote. Each common share is entitled to one vote on each matter
to be voted on at the meeting.
The following information is given as of March 11, 2002, for
persons known by management to beneficially own more than 5%
of our common shares. All of the shares listed are
beneficially owned through voting and investment power held
solely by the reported owner, except as otherwise indicated.
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Amount and Nature
Name and Address of Beneficial Percentage of
of Beneficial Owner Ownership Ownership
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IFC Trust Under Trust Agreement dated 6/29/90,
Clementine M. Tangeman, Donor, Irwin Miller,
Trustee
301 Washington Street
Columbus, Indiana 5,160,592(1) 18.74%
Irwin Miller
301 Washington Street
Columbus, Indiana 5,310,358(1,2) 19.29%
William I. Miller
500 Washington Street
Columbus, Indiana 10,869,523(1,3) 39.45%
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1. Certain shares owned by the IFC Trust (5,160,592 shares,
which were donated to the Trust by the Estate of Mrs.
Clementine Tangeman) and Mr. Irwin Miller (5,160,544 shares)
are subject to an irrevocable proxy held by Mr. William I.
Miller to vote such shares. Mr. William I. Miller holds a
right to acquire these same 10,321,136 shares, pursuant to
options purchased by Mr. Miller from Mrs. Clementine Tangeman
and Mr. Irwin Miller, within 60 days of March 11, 2002, but
subject to certain contingencies.
2. Includes 132,535 shares owned by Mr. Irwin Miller's wife,
Xenia S. Miller, as to which Mr. Miller holds no voting or
investment power and for which Mr. Miller expressly disclaims
any beneficial interest; 15,310 shares as to which Mr. Miller
holds voting and investment power; and 1,969 shares that Mr.
Miller has the right to acquire within 60 days of March 11,
2002 through the exercise of stock options.
3. See Footnote 1 above. Includes 138,945 shares as to which Mr.
Miller holds voting and investment power; 22,812 shares for
which Mr. Miller is the custodian of on behalf of his
children and for which Mr. Miller expressly disclaims any
beneficial interest; 10,055 shares that are held in the 1998
William I. Miller Annual Exclusion Trust, Lynne M. Maguire,
Trustee, for which Mr. Miller expressly disclaims any
beneficial interest; and 376,575 shares that Mr. Miller has
the right to acquire within 60 days of March 11, 2002 through
the exercise of stock options.
2.
Security Ownership of Management
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The following information about the ownership of our common
shares is given as of March 11, 2002 for our director
nominees, directors and certain executive officers,
individually, and all our director nominees, directors and
executive officers as a group.
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Name of Amount and Nature of
Beneficial Owner Beneficial Ownership(3,4) % of Common Shares
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William I. Miller(2,6) 10,869,523(1) 39.45%
John A. Nash(2,6) 574,798 2.07%
Theodore M. Solso(2) 39,854 *
Sally A. Dean(2) 23,216 *
David W. Goodrich(2) 21,170 *
John T. Hackett(2) 38,633 *
William H. Kling(2) 17,755 *
Brenda J. Lauderback(2) 13,124 *
John C. McGinty, Jr.(2) 20,185 *
Lance R. Odden(2) 23,768 *
Elena Delgado(6,7) 23,577 *
Robert H. Griffith(6) 22,317 *
Thomas D. Washburn(6) 144,846 *
Directors and Executive
Officers as a Group (25
persons) 12,169,656(5) 44.15%
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* Less than 1%
1. See Footnotes 1 and 2 to the table under "Principal
Shareholders."
2. Director.
3. For directors, Dean (3,908 shares), Hackett (5,443 shares),
Kling (4,930 shares), McGinty (6,331 shares), Odden (5,485
shares) and Solso (4,476 shares), includes shares as to which
the director holds sole voting power but no investment power
under our Outside Director Restricted Stock Compensation
Plans.
4. Includes shares that the following directors and executive
officers have the right to acquire within 60 days of March
11, 2002 through the exercise of stock options: Dean (9,328
shares), Goodrich (7,585 shares), Hackett (6,050 shares),
Kling (6,650 shares), Lauderback (10,836 shares), McGinty
(7,585 shares), Odden (7,585 shares), Solso (7,265 shares),
Miller (376,575 shares), Nash (255,550 shares), Delgado
(19,800 shares), Griffith (11,970 shares), and Washburn
(111,765 shares).
5. Includes shares that the other executive officers have a
right to acquire within 60 days of March 11, 2002 through the
exercise of stock options (288,162 shares). See also Footnote
4 above.
6. Executive officer.
7. Ms. Delgado is the President of Irwin Home Equity, a
subsidiary of Irwin Union Bank and Trust Company, which is
one of our subsidiaries. She owns 5% of the common stock of
Irwin Home Equity. Her ownership in Irwin Home Equity,
together with the rights under her shareholder agreement, in
effect provides Ms. Delgado with a 5% interest, net of our
preferred interest, in the value of the home equity line of
business conducted jointly by Irwin Home Equity and Irwin
Union Bank and Trust.
3.
Election of Directors
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Three directors are to be elected to our Board of Directors at
the Annual Meeting in 2002. Proxies granted for use at the
Annual Meeting cannot be voted for more than three nominees.
Our Board of Directors currently consists of 10 members
divided into three classes of directors who are elected to
hold office for staggered terms of one, two or three years, as
provided in our by-laws. Directors Miller, Nash and Solso
currently are serving a one-year term, which expires in 2002;
Directors Goodrich, Hackett, Lauderback and McGinty are
serving a two-year term, which expires in 2003; and Directors
Dean, Kling and Odden are serving a three-year term, which
expires in 2004.
The three nominees being proposed for election at the Annual
Meeting to serve a three-year term of office are William I.
Miller, John A. Nash, and Theodore M. Solso.
The persons named as Proxies in the accompanying form of proxy
will, unless otherwise indicated in the form of proxy, vote
the shares covered by proxies for the election of nominees
Miller, Nash and Solso, included in the following table.
Management has no reason to believe that any of the nominees
will be unable to serve. However, should a nominee for
director become unavailable for election, and unless the Board
of Directors or the Executive Committee reduces the size of
the Board to a number equal to the number of nominees who are
able and willing to serve, the persons named in the
accompanying form of proxy will vote for a substitute who will
be designated by the Board of Directors or the Executive
Committee.
The following table sets forth, as of March 11, 2002, the
name; year in which the nominee or current director was first
elected as a director; for nominee directors, expiration of
term if elected to a three-year term at this year's annual
meeting; for current directors, expiration of the director's
current term; principal occupation for the past five years of
each nominee director or current director; the percentage of
the total number of meetings of our Board of Directors and
meetings of committees of our Board of which the director is a
member attended by each director during 2001; all other
directorships or other positions held by each nominee in other
corporations subject to the reporting requirements of the
Securities Exchange Act of 1934 and in any investment company;
and the director's age. There are no family relationships
among any of the director nominees or executive officers.
4.
DIRECTOR NOMINEES:
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[William I. Miller] William I. Miller*
(Director since 1985; expiration of term 2005)
Mr. Miller has been our Chairman since August 1990. He is a director of Cummins Inc.,
The Tennant Company, the New Perspective Fund, Inc. and the New World Fund, Inc. of the
American Funds family of the Capital Group. He is a trustee of EuroPacific Growth Fund
of the American Funds family of the Capital Group. He also serves as a trustee of The
Taft School and of the National Building Museum. In 2001, Mr. Miller attended 100% of
our Board and Committee meetings of which he is a member. Age 45.
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[John A. Nash] John A. Nash*
(Director since 1972; expiration of term 2005)
Mr. Nash is Chairman of the Executive Committee and has been our President since August
1990. He is chairman of the Board of Trustees of Columbus Regional Hospital. In 2001,
Mr. Nash attended 100% of our Board and Committee meetings of which he is a member. Age
64.
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[Theodore M. Solso] Theodore M. Solso*
(Director since 1993; expiration of term 2005)
Mr. Solso has been the Chairman and Chief Executive Officer of Cummins Inc. since
January 2000. He served as President and Chief Operating Officer of Cummins from 1995
to 2000. He is a director of the Ashland Company and Cummins Inc., and a trustee of
DePauw University. In 2001, Mr. Solso attended 86% of our Board and Committee meetings
of which he is a member. Age 55.
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CURRENT DIRECTORS:
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[Sally A. Dean] Sally A. Dean
(Director since 1995; expiration of term 2004)
Ms. Dean is a retired Senior Vice President of Dillon, Read & Co. Inc. (investment
bank, which is now part of UBS Warburg). She serves as Chairman of the Paideia School
Endowment Board and is former President of the Board of Trustees, Randolph-Macon
Woman's College, where she is a member of the investment committee. In 2001, Ms. Dean
attended 95% of our Board and Committee meetings of which she is a member. Age 53.
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5.
[David W. Goodrich] David W. Goodrich
(Director since 1986; expiration of term 2003)
Mr. Goodrich has been President and Chief Executive Officer of Central Indiana Corporate
Partnership since June 1999. He was the former President of the Indianapolis, Indiana
Colliers Turley Martin Tucker Company (a realty company) from May 1998 to July 1999. He is
Chairman of the Board of Citizens Gas and Coke Utility and a director of Clarian Health
Partners, Inc. and American United Life Insurance Company. In 2001, Mr. Goodrich attended
100% of our Board and Committee meetings of which he is a member. Age 54.
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[John T. Hackett] John T. Hackett*
(Director since 1981; expiration of term 2003)
Mr. Hackett was Managing General Partner of CID Equity Partners, L.P. (a private equity
investment partnership) since 1991, retiring from that position at the end of 2001. He is
a director of the Wabash National Corp. and the Ball Corporation. In 2001, Mr. Hackett
attended 87% of our Board and Committee meetings of which he is a member. Age 69.
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[William H. Kling] William H. Kling
(Director since 1993; expiration of term 2004)
Mr. Kling has been President and Chief Executive Officer of the American Public Media
Group ("APMG") since 2000. APMG is the parent company of Minnesota Public Radio, Southern
California Public Radio and the Greenspring Company (a diversified media company). Mr.
Kling became President of Minnesota Public Radio (a regional network of 31 public radio
stations) in 1966. In 1987, he became the President of the Greenspring Company. He is a
director of The St. Paul Companies, The Wenger Corporation, AT&T Cable of St. Paul and
several funds of the American Funds family of the Capital Group. In 2001, Mr. Kling
attended 100% of our Board and Committee meetings of which he is a member. Age 59.
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[Brenda J. Lauderback] Brenda J. Lauderback
(Director since 1996; expiration of term 2003)
Ms. Lauderback was former President of the Retail and Wholesale Group of the Nine West
Group, Inc. from May 1995 until January 1998. She is a director of Big Lots, Inc.
(formerly Consolidated Stores) and Louisiana-Pacific Corporation. She is a trustee for the
Hord Foundation. In 2001, Ms. Lauderback attended 94% of our Board and Committee meetings
of which she is a member. Age 51.
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6.
[John C. McGinty, Jr.] John C. McGinty, Jr.*
(Director since 1991; expiration of term 2003)
Mr. McGinty has been the President of Peregrine Associates, Inc. (a healthcare,
governance, and leadership consulting firm) since 1997. He has been the Managing
Director of The Greeley Company (a healthcare leadership consulting, strategic
planning, education, and publications firm) since 1997, and was a part-time faculty
member at Indiana University from 1997 to 2001. From 1986 to 1997, Mr. McGinty was the
President and Chief Executive Officer of Southeastern Indiana Health Management, Inc.
and Columbus Regional Hospital. In 2001, Mr. McGinty attended 100% of our Board and
Committee meetings of which he is a member. Age 52.
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[Lance R. Odden] Lance R. Odden
(Director since 1991; expiration of term 2004)
Mr. Odden retired as Head Master of The Taft School (a private educational institution)
in June 2001, having served in that capacity since 1972. Mr. Odden serves as an advisor
to Warburg Pincus and is a trustee of the Thatcher School and a director of the
Chancellor Beacon Academies. In 2001, Mr. Odden attended 91% of our Board and Committee
meetings of which he is a member. Age 62.
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* Member of the Executive Committee.
Compliance with Section 16(a) OF THE SECURITIES ACT OF 1934
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There are no material proceedings to which any of our
directors, executive officers, or affiliates, any owner of
record or beneficial owner of more than 5% of any class of our
voting securities, or any associate of any such director,
executive officer, affiliate, or security holder is a party
adverse to us or any of our subsidiaries, nor does any such
person have a material interest adverse to us or any of our
subsidiaries.
Section 16(a) of the Securities Exchange Act of 1934 requires
our directors and executive officers, and persons who own more
than 10% of a registered class of our equity securities, to
file with the SEC initial reports of ownership and reports of
changes in ownership of our common shares and our other equity
securities. Executive officers, directors, and greater than
10% shareholders are required by the SEC to furnish us with
copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of
the reports furnished to us and written representations that
no other reports were required, all Section 16(a) filing
requirements applicable to our executive officers, directors,
and greater than 10% shareholders for fiscal 2001 were met,
with the exception of a purchase by Mr. Theodore M. Solso,
Director, of 200 shares in May 1999 which was inadvertently
not reported. When this oversight was discovered in 2001, Mr.
Solso immediately reported the transaction.
7.
Director Meetings and Committees
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The Board of Directors of the Corporation held seven meetings
during 2001.
We have appointed certain members of our Board to serve on
various committees of our Board of Directors. Our Board of
Directors has established four standing committees: (1) the
Audit Committee; (2) the Compensation Committee; (3) the
Governance Committee; and (4) the Executive Committee.
AUDIT COMMITTEE
The Audit Committee has primary responsibility for
recommending the firm to be employed as our independent
auditors; consulting with the independent auditors regarding
the plan of audit; reviewing, in consultation with the
independent auditors, the report of audit, or proposed report
of audit, and the accompanying management letter, if any;
reviewing and directing the work performed by our internal
audit department; reviewing regulatory examination reports
received by us and our subsidiaries; and consulting with the
independent and internal auditors about the adequacy of
internal controls. The members of the Audit Committee are
directors Dean, Hackett, Lauderback and McGinty. The Committee
held nine meetings during 2001.
COMPENSATION COMMITTEE
The Compensation Committee reviews and considers
recommendations from management concerning our executive
compensation policies, employee benefit plans, and salary
administration program, including reviewing annually the total
compensation and recommended adjustments for all of our
officers and the officers of our subsidiaries. This Committee
administers the short-term and long-term management incentive
plans and the existing stock option and employee savings
plans. The deliberations of the Committee are reported to the
Board of Directors for review and approval. The members of the
Compensation Committee are directors Dean, Goodrich and Kling.
The Committee held three meetings in 2001.
GOVERNANCE COMMITTEE
The Governance Committee makes recommendations to the Board of
Directors regarding general qualifications for nominees as
directors, desired areas of community and business
representation, size of the Board of Directors and the terms
of its members, director compensation, and the retirement
policy for directors. On the basis of these general
determinations, this committee recommends qualified
individuals to serve as directors. Shareholder recommendations
for nominees will be accepted by this Committee; however, no
formal procedures have been developed to consider such
recommendations. The members of the Governance Committee are
directors Goodrich, McGinty, Miller, Nash and Odden. The
Committee held four meetings in 2001.
8.
EXECUTIVE COMMITTEE
The Executive Committee acts on the Board of Directors' behalf
at such times as may be designated by the Board of Directors
to conduct the business of the Board of Directors, subject to
limitations imposed by law, our articles, our by-laws or
resolutions of our Board of Directors. The members of the
Executive Committee are directors Hackett, McGinty, Miller,
Nash and Solso. The Committee held no meetings in 2001.
Outside Director Compensation
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Under the outside directors' fee schedule, from January 1,
2001 to December 31, 2001, each of our outside directors
earned a retainer of $45,000, $25,000 of which was paid in the
form of stock options. In 2002, the directors will earn a
retainer fee of $50,000, $25,000 of which will be paid in the
form of stock options. The remainder of the retainer is
payable in cash, additional stock options, or in common shares
issued under our 1999 Outside Director Restricted Stock
Compensation Plan. During 2001, options were granted to our
outside directors to purchase an aggregate of 19,200 common
shares at a per share exercise price of $21.38. Options to
purchase a total of 26,400 common shares have been issued to
our outside directors in 2002, representing $25,000 of each
director's retainer fee for 2002.
In addition to the annual retainer described above, in 2001,
our outside directors received $1,000 for attending each
meeting of our Board of Directors and $1,000 for attendance at
each meeting of a committee of our Board of Directors. The
committee chairpersons also received an additional retainer of
$3,000. In 2002, members of the Audit Committee will receive
$2,000 for each meeting attended.
The 1999 Outside Director Restricted Stock Compensation Plan
covers only our non-employee directors and the non-employee
directors of our subsidiaries, allowing an outside director to
elect to receive the remainder of his or her annual retainer
fees ($20,000 in 2001, $25,000 in 2002) and/or meeting
attendance fees (collectively, director fees) in the form of
common shares rather than in cash, with a market value
equivalent to the cash value of the fees. The outside director
plan allows the grant of up to 100,000 common shares through
December 31, 2009. Grants under the outside director plan may
be for one or more years of future service. The common shares
granted under the outside director plan are subject to
forfeiture on a pro rata basis if the outside director
recipient does not serve until the end of the outside director
plan year to which the common shares apply. Forfeited common
shares will revert to us.
A committee, appointed by the Board of Directors, administers
the plan. Except for an election for a calendar year in which
a person first becomes an outside director, each election is
effective for not less than one calendar year but may be made
for additional calendar years subject to any limitation
imposed by the committee at the time an election is made. A
grant of common shares for multiple years of service will be
equal to the value of the cash retainer and/or meeting fees
earned during the number of years covered by the grant.
9.
Before delivery to outside directors, certificates issued by
the outside director committee under the plan will be held by
our Secretary for one year after the last date covered by the
election under which the common shares were issued, or an
earlier date determined by the outside director committee.
An outside director has only limited rights as a shareholder
with respect to common shares subject to an election until the
certificates representing those shares are issued. When a
certificate is issued, the outside director will have the
power to vote the common shares represented by the certificate
on all matters presented to a vote of our shareholders and
will be entitled to receive all dividends and other
distributions declared or paid by us on those shares. An
outside director will have no right to sell, pledge, encumber,
or otherwise dispose of any common shares issued under the
outside director plan during the time the certificates
representing common shares are held by our Secretary, other
than for transactions between the outside director and us or
any of our directors or affiliates.
At present, a total of 30,573 common shares are registered
under the outside director plan in the names of the
participating director nominees. A total of 32,889 shares have
been granted to participants in the outside director plan.
Grants made under the previous outside director plan since its
inception in 1989 total 102,402 common shares. During 2001,
directors Dean, Hackett, Kling, McGinty, Odden, and Solso
participated in the outside director plan.
No fees other than director fees are paid to directors for
services rendered in that capacity. Directors who are our
officers or officers of our subsidiaries do not receive any
director fees.
10.
Executive Compensation and Other Information
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Summary of Cash and Certain Other Compensation
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The following table provides certain summary information
concerning compensation paid or accrued by us and our
subsidiaries to or on behalf of our Chairman (we do not
formally use the title of chief executive officer) and each of
our four other most highly compensated executive officers for
the fiscal years ended December 31, 1999, 2000 and 2001:
SUMMARY COMPENSATION TABLE
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Long-Term
Compensation All Other
Annual Compensation(1,4) Awards Compensation(5,6,7)
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Name & Principal Position Year Salary(2) Bonus(3) Option/SAR(#)
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William I. Miller 2001 $480,667 $699,989 101,100 $5,100
Chairman 2000 469,333 665,400 99,900 5,100
1999 440,000 644,855 49,600 3,840
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Robert H. Griffith 2001 $220,000 $852,503 4,600 $7,800(8)
President and CEO-Irwin 2000 158,333 142,808 3,400 7,400(8)
Mortgage Corporation 1999 130,000 115,022 2,100 7,400(8)
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John A. Nash 2001 $324,000 $425,826 38,400 $5,100
President 2000 316,667 313,096 41,500 5,100
1999 306,667 327,793 25,700 3,840
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Elena Delgado 2001 $226,667 $278,589 12,700 $5,100
President-Irwin Home 2000 216,667 310,457 5,000 5,100
Equity Corporation 1999 193,333 195,911 4,000 2,484
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Thomas D. Washburn 2001 $246,667 $239,192 13,600 $5,100
Executive Vice President 2000 230,000 222,488 12,800 5,100
1999 203,333 196,164 9,700 3,382
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1. Amounts other than salary are reported on an accrual basis.
2. Includes amounts directed by the executive officer to be
contributed on a pre-tax basis to our savings plans.
3. Includes short-term bonus payments from us and certain
subsidiaries.
4. With respect to each individual named in the Summary
Compensation Table there were no perquisites or other
personal benefits, securities or property paid in the years
shown which, in the aggregate, exceeded either $50,000 or 10%
of the total of such individual's annual salary and bonus.
5. Excludes for Messrs. Miller, Nash and Washburn benefits
accrued under our supplemental retirement benefit plan. See
"Supplemental Retirement Benefit Plan."
6. Includes contributions by us or certain subsidiaries to
qualified savings plans. (See Note 7.)
7. Detailed information relevant to the "All Other Compensation"
column for 2001 in the Summary Compensation Table above is
shown in the following table.
8. Excludes compensation payable to Robert H. Griffith under the
terms of the Irwin Mortgage Long-Term Incentive Plan
disclosed elsewhere herein. See "Long-Term Incentive Plans."
11.
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Qualified
Name Savings Plan
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2001
-------------------------------------------------------------------------------
William I. Miller $5,100
Robert H. Griffith 7,800
John A. Nash 5,100
Elena Delgado 5,100
Thomas D. Washburn 5,100
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Stock Options and Stock Appreciation Rights
--------------------------------------------------------------------------------
The following table contains information concerning the grant
of stock options under our 1997 Stock Option Plan to each
named executive officer during 2001:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------------------------------
Percent of
Total
Options/SARs Exercise Grant Date Value
Options/ Granted to of Base ----------------
SARs Employees Price Expiration Grant Date
Name Granted(1)# in Fiscal Year ($/SH) Date Present Value(2)
-----------------------------------------------------------------------------------------------
William I. Miller 101,100 25.58% $21.38 4/24/2011 $1,148,496
Robert H. Griffith 4,600 1.16 21.38 4/24/2011 52,256
John A. Nash 38,400 9.72 21.38 4/24/2011 436,224
Elena Delgado 12,700 3.21 23.425 8/29/2011 155,067
Thomas D. Washburn 13,600 3.44 21.38 4/24/2011 154,496
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1. All grants are subject to a vesting schedule where 25% of
each grant is vested on the date of the grant and 25% of each
grant vests on the anniversary date of each grant in each of
the three years following the grant.
2. For the options expiring 4/24/2011, total option values shown
in the far right-hand column were derived using the Binomial
option pricing model. Assumptions used in the valuation
included an expected volatility factor of .40, an expected
future dividend yield of .01, and a risk-free rate of return
of .0526. The Binomial model suggests a valuation of $11.36
per share under these assumptions. The Black-Scholes option
pricing model would suggest a valuation of $11.28 per share
under these same assumptions. For the options expiring on
8/29/2011, assumptions used in the valuation include an
expected volatility of .40, an expected future dividend yield
of .01, and a risk free rate of return of .0481. Under these
assumptions, the Binomial model suggests a valuation of
$12.21 per share, and the Black-Scholes option pricing model
suggests a valuation of $12.12 per share. The use of a single
value as shown in the table above implies a precision to
stock option valuation that we do not believe exists and that
therefore may cause the above table to be misleading.
Accordingly, there is no assurance that the value realized on
the options, if any, will be at or near the value estimated
by the Binomial option pricing model. Future compensation
resulting from option grants is based solely upon the
performance of our stock price.
In February 2002, options to purchase a total of 627,800
shares were granted under our 2001 Stock Plan, including
243,700 options granted to the named executive officers. The
options are exercisable at a price of $15.65, which was the
average of the closing bid and ask prices of our common stock
reported immediately prior to the pricing of our common stock
offering on February 14, 2002.
12.
Option/SAR Exercises and Holdings
--------------------------------------------------------------------------------
The following table provides information, with respect to each
named executive officer, concerning the exercise of options
and/or SARs during 2001 and unexercised options and SARs held
as of the end of 2001:
AGGREGATED OPTIONS/SARS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
---------------------------------------------------------------------------------------------------------
Shares
Acquired Number of Unexercised
on Options/SARs at Fiscal Value of Unexercised
Exercise Value Year-End In-the-Money Options/SARs
Name (#) Realized (#) at Fiscal Year-End(1)
---------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
---------------------------------------------------------------------------------------------------------
William I. Miller 66,400 $1,314,886 278,825 138,175 $ 905,676 $1,561
Robert H. Griffith -- -- 7,645 5,675 6,678 53
John A. Nash 127,200 2,581,550 215,825 55,975 1,216,487 648
Elena Delgado -- -- 11,675 13,025 10,016 78
Thomas D. Washburn 10,000 184,687 97,915 19,025 640,619 200
---------------------------------------------------------------------------------------------------------
1. The closing price of our common shares on December 31, 2001
was $17.00 per share.
Long-Term Incentive Plans
--------------------------------------------------------------------------------
The following table provides information concerning an award
made during 2001 under the Irwin Mortgage Long-Term Incentive
Plan to named executive officer Robert H. Griffith. The award
represents an accrued liability. This award is
performance-based, with targets established by the Board of
Directors of Irwin Mortgage.
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
--------------------------------------------------------------
Number of
Shares, Performance or
Units or Other Period Until Estimated Future Payouts
Other Maturation or Under Non-Stock Price-Based
Name Rights Payout Plans ($ or #)
-------------------------------------------------------------------------------------------
Deferrable Compensation
Robert H. Griffith $380,998 under Terms of the Plan $380,998
-------------------------------------------------------------------------------------------
Pension Plans
--------------------------------------------------------------------------------
We and certain of our subsidiaries maintain a non-contributory
qualified defined benefit Employees' Pension Plan. This plan
provides for retirement benefits to most of the officers and
employees of these companies. Under the provisions of this
plan, participating companies will contribute assets
sufficient to pay all benefits to plan participants.
Contributions to this plan are actuarially determined to fund
the current service cost on a current basis and to fund
initial past service costs over a period of 30 years.
Employees who have completed one year of service (1,000 hours
worked during a 12-month period) are eligible for
participation. Benefits vest after five years of credited
service. In addition to
13.
benefits paid to retiring employees, death and deferred
termination benefits are available to employees who meet
certain conditions under this plan.
The table below shows the estimated annual benefits payable,
based upon reasonable assumptions, under this plan as in
effect on December 31, 2001. Basic wages considered for this
plan are for the five consecutive plan years of highest
compensation, and include basic compensation, commissions, and
payments from short-term bonus plans. In accordance with
Section 401(a)(17) of the Internal Revenue Code of 1986 (IRC),
basic wages above $170,000 are not used in the calculation of
plan benefits.
--------------------------------------------------------------
Years of Service
--------------------------------------------------------------
Remuneration 15 20 25 30 35
--------------------------------------------------------------
$ 50,000 $11,000 $14,700 $18,300 $18,700 $19,200
75,000 18,300 24,400 30,500 31,700 33,000
100,000 25,600 34,200 42,700 44,700 46,800
215,000 32,900 43,900 54,900 57,700 60,600
150,000 40,200 53,700 67,100 70,700 74,400
175,000 46,100 61,500 76,800 81,100 85,500
200,000 46,100 61,500 76,800 81,100 85,500
225,000 46,100 61,500 76,800 81,100 85,500
250,000 46,100 61,500 76,800 81,100 85,500
275,000 46,100 61,500 76,800 81,100 85,500
300,000 46,100 61,500 76,800 81,100 85,500
350,000 46,100 61,500 76,800 81,100 85,500
400,000 46,100 61,500 76,800 81,100 85,500
450,000 46,100 61,500 76,800 81,100 85,500
500,000 46,100 61,500 76,800 81,100 85,500
--------------------------------------------------------------
The current years of service at December 31, 2001, for the
individuals named in the compensation tables above, are as
follows: Mr. Nash (35), Mr. Washburn (25), and Mr. Miller
(11). Mr. Griffith and Ms. Delgado are not covered by the
Plan.
Benefits listed in the pension plan table are payable under
various annuity options and are not subject to any deduction
for Social Security or other offset amounts. This plan was
amended effective January 1, 1994. For service after January
1, 1994, Mr. Washburn received an additional benefit accrual
equal to 75% of his usual benefit. In 1999, Mr. Washburn
received a one-time benefit accrual equal to 225% of his usual
benefit. This increase brings Mr. Washburn into parity with
other executives. For service after January 1, 1994, Mr.
Miller received an additional benefit accrual equal to 75% of
his usual benefit.
Supplemental Retirement Benefit Plan
--------------------------------------------------------------------------------
On May 19, 1992, the Board of Directors approved our
Compensation Committee's recommendation to provide a
supplemental executive retirement benefit to William I.
Miller. A similar benefit was approved prior to 1992 for John
A. Nash. A similar benefit was implemented on January 1, 2000
for Thomas D. Washburn. The benefit provides the participants
with an amount of company-provided benefits not provided under
the pension plan because of the limitations imposed by
Sections 415 and 401(a)(17) of the IRC. Criteria used to
determine
14.
amounts payable under this benefit are the same as those used
by our pension plan; that is, service with us, age at
retirement, and earnings. Benefits are measured in the same
manner as under the pension plan, using credited service with
us. Method of payment of the supplemental benefit is a monthly
annuity payable for life, with a guarantee of 180 payments.
The table below shows the estimated annual benefits payable,
based upon reasonable assumptions, under this plan as in
effect on December 31, 2001:
-------------------------------------------------------------------
Years of Service
-------------------------------------------------------------------
Remuneration 15 20 25 30 35
-------------------------------------------------------------------
$ 170,000 $ 0 $ 0 $ 0 $ 0 $ 0
200,000 8,800 11,700 14,700 15,600 16,500
275,000 30,700 40,900 51,200 54,600 58,000
350,000 52,600 70,200 87,800 93,600 99,400
425,000 74,600 99,400 124,300 132,600 140,800
500,000 96,500 128,700 160,900 171,600 182,300
575,000 118,500 157,900 197,500 210,600 223,700
650,000 140,400 187,200 234,000 249,600 265,200
725,000 162,300 216,400 270,600 288,600 306,600
800,000 184,300 245,700 307,200 327,600 348,000
875,000 206,200 274,900 343,700 366,600 389,500
950,000 228,100 304,200 380,300 405,600 430,900
1,025,000 250,100 333,400 416,800 444,600 472,300
1,100,000 272,000 362,700 453,400 483,600 513,800
1,175,000 294,000 391,900 490,000 522,600 555,200
-------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
--------------------------------------------------------------------------------
Members of the Committee are Ms. Dean, and Messrs. Goodrich
and Kling. No member of the Compensation Committee of our
Board of Directors was, during 2001, an officer or employee of
us or any of our subsidiaries.
Board Compensation Committee Report on Executive Compensation
--------------------------------------------------------------------------------
Executive compensation is reviewed and approved annually by
the Compensation Committee of the Board of Directors. Each
member of the Compensation Committee is a non-employee
Director. Set forth below is a report submitted by Ms. Dean
and Messrs. Goodrich and Kling in their capacity as the
Board's Compensation Committee addressing the Corporation's
compensation policies for 2001. The principal executive
officer of the Corporation is the Chairman, Mr. William I.
Miller.
I. Compensation Policy for Executive Officers
--------------------------------------------------------------------------------
The Compensation Committee believes that compensation plans
make up only one element in our overall system of executive
compensation. Furthermore, appropriate compensation policies
are a necessary, but not sufficient, condition for achieving
our goals. A good compensation system will not guarantee that
we achieve our goals, but a poor system can result in those
goals not being achieved.
15.
This interdependence requires that our compensation system
align with our guiding philosophy (what we believe), our
mission (what we want to be), and our strategy (what we want
to do). Our guiding philosophy and the kinds of people needed
to bring this alignment to life are the starting points for
developing our philosophy and system of compensation.
Our executive compensation system focuses on the total
compensation package of our top executives. Our objective is
to correlate total compensation with our performance so that
median performance relative to similar companies in our
industry will produce median total compensation for
individuals relative to comparable positions in peer
companies. Likewise, inferior performance will produce below
median compensation, and superior performance will produce
above median compensation.
This approach requires that we start by defining the
appropriate peer group, both for individual positions and the
Corporation as a whole. For individual positions, this
decision is based on the relative level and scope of
responsibilities inherent in the position, and the talent and
skills required for success.
The traditional measure for the scope of responsibilities in
commercial banks and bank holding companies is asset size.
Mortgage banking companies generally look at both loan closing
volume and loan servicing size. Consumer finance companies
consider origination volume. Our strategy is to enhance
capital productivity, which is defined as generating
proportionately larger streams of revenues and profits from a
given capital and asset base. Asset growth in itself is not
one of our strategic objectives, and our success is not
defined only by asset size, loan volume, or servicing size. As
a result, in calibrating the scope of responsibility of a
given position, we look at comparable positions in other
companies in multiple asset-size groups as well as peer
companies defined by other measures (such as total market
capitalization or revenues) when they are available.
Performance comparisons are generally made from the
shareholders' perspective. That is, groups of companies are
selected that may be seen as alternative investments by
current and prospective investors. Even so, our most direct
competitors for executive talent are not necessarily all of
the companies that would be included in a peer group selected
to compare shareholder returns. Thus, although there may be
some overlap, the surveys selected for compensation review
purposes do not contain information on the same companies as
those found in the peer group indices in the Comparison of
Five-Year Cumulative Total Return graph which follows this
report.
All of our operating companies (including the Corporation as a
separate entity) use multiple sources of both compensation and
performance data because experience has shown that results can
vary greatly from one survey to the next. In the case of
compensation market data, the Compensation Committee is
provided with multiple sources of data on each executive
position reviewed. When available, the information is in the
form of 25th percentile, median, and 75th percentile
compensation. Four different market compensation comparisons
were considered for the Chairman in 2001, including a
proxy-based custom study conducted by the executive
compensation consulting firm Towers Perrin.
16.
Historically, total compensation has been defined in surveys
to include only base salary and the annual bonus. When
reliable information on the present value of long-term grants
is available, it is used as additional support for
compensation decisions.
The percent of total compensation that is variable increases
with the executive's position. This approach is consistent
both with the individual's influence on results and his/her
economic capacity to tolerate volatility in compensation
levels.
In addition to information on the market level of
compensation, members of the Compensation Committee review a
summary of individual performance over the past year,
including key accomplishments, strengths, and opportunities
for improvement. They also may consider their own subjective
assessments of an executive's performance and relative
contribution to the organization.
II. The Elements of Executive Compensation and Corporate Performance
--------------------------------------------------------------------------------
There are three elements of Executive Compensation and
Corporate Performance: Base Salary, Annual Short-Term Bonus,
and Long-Term Incentives.
A. Base Salary
Base salary is important in achieving the goal of attracting
and retaining qualified executives. Base salary is generally
targeted to be at the median of similar positions in the
industry. Exceptions may exist when a higher level of base
salary would be required to attract or retain a uniquely
qualified executive officer. In order to maintain the target
position, annual increases are approximately equal to the
median increases in the respective industries in which our
operating companies compete unless the growth of the company
warrants comparison with a larger peer group in that industry.
The total base salary paid to the Chairman in 2001 was
$480,667, up 2.4% from 2000.
B. Annual Short-Term Bonus
The annual bonus is the component that provides a variable
current cash compensation reward for above median current
performance. Each executive officer participating in the
annual bonus plan has a target opportunity expressed as a
percentage of base salary. We believe that this method, when
combined with properly selected performance targets, rewards
managers for making investments in future performance, valuing
consistency, and managing risk.
Operating company presidents receive part of their target
annual bonuses based upon the performance of their respective
companies, and part based upon consolidated performance of the
Corporation. Thus, they have financial incentives to achieve
synergies between operating companies.
We believe that the best performance targets are those that
are objectively and consistently measured, as well as easily
understood by participants. The bonus plans of the Corporation
and its operating companies include return on equity or
17.
a proxy for return on equity as a key performance measure. The
Board of Directors approves specific performance targets each
year for each operating company and the Corporation. The
targets are based upon a variety of factors, including
historical and expected industry performance, the estimated
required rate of return by investors, and the prior year's
budgeted and actual performance. Bonus payments begin at a
threshold level and increase proportionately as performance
increases.
The short-term bonus design included a mechanism to smooth the
payment of amounts greater than twice target performance and
less than threshold performance.
C. Long-Term Incentives
Long-term incentive plans supplement the incentive provided by
annual bonus plans for building the value of the Corporation
over the long term. Operating company heads may receive the
majority of their long-term compensation based upon growth in
the value of their subsidiary operating company. Certain
holding company executive officers and some operating company
executive officers are provided with long-term incentive
compensation through grants of non-qualified stock options.
Our existing stock option plans include the ability to grant
Non-Qualified Stock Options, Stock Appreciation Rights and
Incentive Stock Options. The 2001 stock plan also includes
restricted stock and phantom stock.
III. Formulation of the Chairman's Compensation
--------------------------------------------------------------------------------
Mr. Miller's current compensation package includes a base
salary of $484,000 plus an annual bonus at target performance
of 60% of base salary or $290,400. As noted above, there is no
single, clear measure of market compensation for executive
positions in the Corporation. The Compensation Committee used
four different market surveys for the Chairman's position in
2001. Based on these surveys, estimates of the 25th
percentile, median, and 75th percentile points of total annual
compensation were made.
Actual total cash compensation paid to Mr. Miller for 2001 was
$1,180,656, up 4.0% from 2000. Even though a substantial
portion of this amount is based upon our financial performance
during the year, some of Mr. Miller's compensation is not tax
deductible to the Company for 2001 under IRC Section 162(m).
Section 162(m) limits the tax deductibility of an executive's
compensation in excess of $1 million unless certain criteria
are satisfied.
For long-term incentive compensation purposes, Mr. Miller
received an option grant of 101,100 shares in 2001 at an
exercise price of $21.38 per share (representing the mean
between the bid and ask closing prices on the grant date).
Through employment of the Binomial option pricing model, we
estimate that the present value of the 2001 options at grant
date was $1,148,496. Due to his opportunity to participate in
the Irwin Ventures LLC long-term compensation plan beginning
in 2000, Mr. Miller's stock option grant was reduced by 5%.
The Irwin Ventures plan pays participants only on occurrence
of realized gains or losses by Irwin Ventures LLC. To date,
there have been no payments to
18.
Mr. Miller under the terms of the Irwin Ventures plan. Mr.
Miller has also received the following grants:
--------------------------------------------------------------------------------
Number of
Year Outstanding Options Exercise Price
---------------------------------------------------------------------------------------
2000 99,900 $16.9700
1999 49,600 $24.09375
1998 28,020 $28.18750
1997 42,180 $13.68750
1996 41,400 $10.65625
1995 54,800 $7.84375
---------------------------------------------------------------------------------------
These seven grants are the only outstanding long-term grants
for Mr. Miller.
Return on average equity for 2001 was 21.83%, compared to
20.83% in 2000. We believe that both returns are in the top
quartile of peer performance. Total shareholder return
(including dividends and price appreciation) was -18.75% for
2001 and 20.83% for 2000 for Irwin Financial. These returns
compare to 12.97% in 2001 and 19.84% in 2000 for the Russell
2000 Financial Services Sector Index.
Comparison of Five-Year Cumulative Total Return
Irwin Financial Corporation, Russell 2000 & Russell 2000 Financial Services
Sector*
--------------------------------------------------------------------------------
[Line Graph]
RUSSELL 2000 FINANCIAL
IRWIN FINANCIAL RUSSELL 2000 SERVICES SECTOR
--------------- ------------ ----------------------
1996 100 100 100
1997 171 122 134
1998 223 120 121
1999 147 145 115
2000 178 141 138
2001 145 144 156
* The Corporation is included in both the Russell 2000 and
Russell 2000 Financial Services indices.
Sally A. Dean David W. Goodrich William H. Kling
19.
Interest of Management in Certain Transactions
--------------------------------------------------------------------------------
Certain of our directors, officers and associates were
customers of and had transactions with our subsidiaries in the
ordinary course of business during the past year, including
insurance services, corporate and personal trust services, and
general commercial and mortgage banking business. Other
transactions may be expected to take place between such
persons and these subsidiaries. All outstanding loans and
commitments included in such transactions were made in the
ordinary course of business and 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.
Companies controlled by Irwin Miller, the Estate of Clementine
M. Tangeman, and William I. Miller purchased commercial paper
from us from time to time. The maximum amount outstanding was
$23,499,711 during 2001, $23,354,766 during 2000 and
$20,489,234 during 1999, and the amount outstanding was
$11,123,183 at year end 2001, $5,735,119 at year end 2000 and
$15,594,192 at year end 1999. In the opinion of management,
the rates paid by us on these commercial paper transactions
were comparable to the prevailing rates for such transactions
at the time of the respective transactions.
In addition to corporate and personal trust services and
general banking business, companies owned or controlled by Mr.
Irwin Miller and the Estate of Clementine M. Tangeman
purchased insurance services (offered by a subsidiary of Irwin
Union Bank and Trust, Irwin Union Insurance, Inc., to the
companies and to the public, generally, as a regular service)
for the sale of which Irwin Union Insurance, Inc. received
gross commissions of approximately $1,165 in 2001, $20,721 in
2000 and $18,047 in 1999. The commissions paid were at the
same rate as those prevailing on comparable sales to the
general public.
We made payments totaling $53,200 in 2001, $51,000 in 2000 and
$47,424 in 1999 to a company controlled by Mr. Irwin Miller
and the Estate of Clementine M. Tangeman in exchange for the
administrative and support services of an employee of such
company. In the opinion of management, such payment was
comparable to, or more favorable to us, than the cost of
hiring an additional employee.
As part of our incentive compensation programs, we have
provided certain key managers of our lines of business with
minority interests in the subsidiaries they manage, including
two of our executive officers -- Michael Taft, who heads our
leasing line of business, and Elena Delgado, who heads our
home equity lending line of business. Under our arrangements
with Mr. Taft, he is entitled to a 5% minority interest in the
common stock of our subsidiary Irwin Capital Holdings
Corporation, the parent company of our leasing line of
business.
We have entered into shareholder agreements with Irwin Home
Equity and its minority common shareholders, including Elena
Delgado. The shareholder agreements, together with the common
shares of Irwin Home Equity held by these individuals, in
effect provide them with a 10% aggregate interest -- and
20.
Ms. Delgado with a 5% interest -- net of our preferred
interest, in the value of the home equity line of business.
Pursuant to the shareholder agreement with Ms. Delgado, as
most recently amended in January 2001, Ms. Delgado's 5%
interest in the common stock of Irwin Home Equity Corporation
is subject to certain anti-dilution provisions. The agreement
provides that in the event of Ms. Delgado's termination for
"serious cause" (as defined in the agreement), all of her
shares will be forfeited and transferred back to us. The
agreement also provides that in the event that Ms. Delgado and
Irwin Financial enter into an agreement whereby we agree to
repurchase any or all of her shares, the purchase price of
such shares shall be equal to the "Fair Market Value" of such
shares, as determined initially by Irwin Home Equity's board
of directors in accordance with the agreement. In the event of
any disagreement with the initial valuation, the agreement
sets forth a further appraisal process pursuant to which the
Fair Market Value of the shares is to be finally determined by
one or more additional qualified appraisers. All appraisals
conducted in accordance with the agreement must take into
account not only the value of the shares beneficially owned by
Ms. Delgado in Irwin Home Equity, but also the value
attributable to the home equity line of business segment of
Irwin Union Bank and Trust. In connection with the
reorganization of certain of our subsidiaries that hold
residual assets from previous home equity securitizations, it
is contemplated that the definition of Fair Market Value in
the agreement will be amended to include, in addition to its
existing components, the value of any such residual assets
that continue to be owned by us but are no longer held
directly or indirectly by Irwin Home Equity or Irwin Union
Bank and Trust. In the event we propose to sell any of our
shares of Irwin Home Equity, Ms. Delgado has certain "co-sale"
rights under the agreement entitling her either to sell a pro
rata portion of her Irwin Home Equity shares at the same time
and to the same purchaser, or alternatively, to purchase from
us a pro rata portion of the shares we have proposed to
transfer, in each case on the same terms and conditions as our
proposed sale.
In January 2002, we entered into loan agreements with four
executives who are also minority shareholders of Irwin Home
Equity, including Ms. Delgado. The principal amount of the
loan made to Ms. Delgado is $1.025 million. The loan, which
has a term of three years, bears interest at a rate of 2.710%
compounded semiannually and is secured by a pledge of Ms.
Delgado's ownership interest in the home equity line of
business (including all her common shares of Irwin Home Equity
and all rights under her shareholder agreement as well as any
shares of capital stock of any other entity to which assets of
Irwin Home Equity may be assigned or distributed from time to
time in connection with the reorganization of this line of
business). Amounts due on the loan are payable upon the
earlier of maturity of the loan or Ms. Delgado's receipt of
proceeds as the result of certain liquidity events.
In addition, as part of employment agreements and incentive
arrangements currently being discussed with Irwin Home Equity
management, we have proposed, subject to certain conditions,
that we make certain tax "gross up" payments to the minority
shareholders, including Ms. Delgado. Under the proposal, if
certain conditions are met, the payments would occur if we or
Irwin
21.
Home Equity purchased shares of Irwin Home Equity from the
minority shareholders and they were required to treat any
portion of their sale proceeds as ordinary income for tax
purposes.
In connection with our effort to reduce the concentration of
residual assets at the bank in light of the new regulatory
capital rules, we are considering a reorganization of certain
subsidiaries that hold residual assets from previous home
equity securitization transactions. As part of this subsidiary
reorganization, we are considering issuing a 10% minority
interest in the common stock of a new subsidiary to the
minority shareholders of Irwin Home Equity, including Ms.
Delgado. Upon formation of the new subsidiary, it is
anticipated that we would receive a preferred interest in an
amount equal to the then current value of any residual assets
we contribute to this subsidiary. To the extent we realize
returns on the residual assets in excess of our liquidation
preference, Ms. Delgado and the other minority shareholders
would share proportionately with us as common shareholders in
the excess return.
During 2001, Irwin Ventures entered into a management
arrangement with certain members of senior management,
including our Chairman, William I. Miller, and Executive Vice
President, Thomas D. Washburn. Under the arrangement,
participating individuals have a carried interest entitling
them, in the aggregate, to up to 20% of the profits earned on
venture investments made by Irwin Ventures. No amounts are
currently accrued to the accounts of Messrs. Miller and
Washburn under this carried interest arrangement. In addition,
certain of our executive officers participate in a private
fund organized to co-invest with Irwin Ventures. At the
beginning of each calendar year, participants may elect to
contribute to the fund a portion of their annual bonus to be
received for that year, up to a current maximum limit of
$25,000. At the election of each individual participant, we
may make a matching contribution in the form of a non-recourse
loan to fund up to 50% of the participant's annual investment
in the co-investment fund. The aggregate amount of the annual
investment is contributed to the fund effective January 1
following the year in which the election is made. To date,
Messrs. Davis, Ehlinger, Griffith, Nash, Souza and Taft have
made co-investments with Irwin Ventures through this fund
totaling $220,000 and have elected to co-invest a total of an
additional $210,000 during 2002. These amounts include
non-recourse loans made to these individuals in the amount of
$110,000 and commitments to loan an additional $105,000 to
these individuals in 2002. These loans will bear interest at a
rate not more than 2% over a prime rate we determine and are
secured by a pledge of the participant's proportionate
interest in the co-investments made during the applicable
year.
Our executive officers have participated in an annual
short-term bonus plan that we implemented in 1998. In general,
provided the company meets or exceeds certain target levels of
financial performance, the plan provides for payment of annual
cash bonuses determined according to a formula based on
specified percentages of the executive's base pay. Payment of
a portion of these bonuses may be deferred. Deferred amounts
were accrued and credited to accounts of the individual
participants for future payouts under the plan. We are in the
process of terminating the current plan and adopting a new
plan, under which we will discontinue a feature that provides
for mandatory deferral of a portion of a
22.
participant's bonus. Under the new plan, all amounts earned as
a bonus and not deferred at the election of a participant will
be paid annually and, except for any elective deferrals, no
amount would be accrued for distribution in future years. We
will distribute to current participants the balances of their
mandatory deferrals. The aggregate deferred amounts payable to
our executive officers are $1,209,145, including amounts
payable to Messrs. Miller, Nash, Washburn and Griffith and Ms.
Delgado equal to $238,378, $134,451, $78,383, $445,732 and
$97,178, respectively.
In 1998, we purchased a 12.5% interest in a Hawker 800
aircraft owned by Cummins Inc. Cummins also provides
maintenance and flight services for the aircraft. We paid
management fees of $46,805 in 2000 and 2001, and $53,300 in
1999 for our ownership interest. We paid $102,588 in 2001,
$70,261 in 2000 and $92,776 in 1999 in operating costs to
Cummins in connection with the aircraft. We also have a
timeshare agreement with Cummins for the use of a substitute
aircraft when the jointly-owned aircraft is undergoing major
maintenance. The costs and terms associated with the ownership
interest and operation of the aircraft were considered at
least as favorable as other alternative aircraft arrangements.
The costs charged under the timeshare agreement are those
permitted by Federal Aviation Regulations. Chairman Miller is
also a director of Cummins Inc. Mr. Solso, one of our
directors, is Chairman, Chief Executive Officer and a director
of Cummins Inc.
In 1979, Irwin Union Insurance, Inc., as an independent
property/casualty insurance agency, was appointed to represent
and offer property/casualty and liability products of The St.
Paul Companies to its customers. Mr. Kling, one of our
directors, is also a director of The St. Paul Companies. Irwin
Union Insurance, Inc. received gross agency commissions of
$77,261 in 2001, $68,694 in 2000 and $94,762 in 1999 from The
St. Paul Companies. Mr. Hackett, one of our directors, until
the end of 2001, was a director of Meridian Insurance Group,
Inc. Irwin Union Insurance, Inc. received gross agency
commissions of $112,366 in 2001, $95,363 in 2000 and $122,758
in 1999 from Meridian Insurance Group, Inc.
Audit Committee Report
--------------------------------------------------------------------------------
The Audit Committee is composed of four independent directors
and assists the Board of Directors in fulfilling its oversight
responsibilities. A charter governs the purpose, composition
and activities of the Audit Committee, and a copy of the
charter is included in Appendix A. In assisting the Board of
Directors, the Audit Committee has performed the following:
- Reviewed and discussed the audited financial statements with
management;
- Discussed with the independent auditors the matters required
to be discussed by Statement on Auditing Standard No. 61
(Communication with Audit Committees);
- Received the written disclosures and letter from the
independent accountants required by Independence Standards
Board Standard No. 1 (Independence
23.
Discussion with Audit Committees), and has discussed with
the auditors the auditors' independence.
Based on the reviews and discussion referred to above, the
Audit Committee recommends to the Board of Directors that the
audited financial statements be included in our Annual Report
on Form 10-K and the Annual Report to Shareholders for the
year ended December 31, 2001.
Audit Committee Members: John C. McGinty, Jr., Chairman; Sally
A. Dean; John T. Hackett; and Brenda J. Lauderback.
In addition to this statement, the fees paid to
PricewaterhouseCoopers must also be disclosed in the proxy.
Accordingly, the fees are reflected in the following section
titled "Independent Public Accountants."
Independent Public Accountants
--------------------------------------------------------------------------------
PricewaterhouseCoopers LLP, certified public accountants, will
audit the books and accounts of the Corporation for 2002. Each
professional service performed by PricewaterhouseCoopers LLP
during 2001 was reviewed and the possible effect of such
services on the independence of the public accounting firm was
considered by the Audit Committee. No member of the firm has
any material interest, financial or otherwise, in us or any of
our subsidiaries.
We have invited representatives of PricewaterhouseCoopers LLP
to be present at the Annual Shareholders' Meeting. We expect
the representatives will attend the meeting. If present, these
representatives will have an opportunity to make a statement,
if they so desire, and will be available to respond to
appropriate questions from shareholders. See "Director
Meetings and Committees" for information regarding our Audit
Committee.
After the completion of our audit for the year 2000, we made a
change in our selection of independent accountants. In June
2001, however, we decided to re-engage our previous
independent accountants, PricewaterhouseCoopers LLP, as more
fully explained below:
- On May 2, 2001, we dismissed PricewaterhouseCoopers LLP as
our independent accountants.
- PricewaterhouseCoopers LLP reported on our financial
statements for the fiscal years December 31, 2000 and
December 31, 1999.
- The report of PricewaterhouseCoopers LLP on our financial
statements for the fiscal years ended December 31, 2000 and
December 31, 1999, contained no adverse opinion or
disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope or accounting principles.
- Our Audit Committee recommended, and our Board of Directors
approved, effective as of May 2, 2001, the decision to
change independent accountants.
- In connection with its audits for the fiscal years ended
December 31, 2000 and December 31, 1999, and through May 2,
2001: (1) we had no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting
principles or
24.
practices, financial statement disclosure, or auditing scope
or procedure, which disagreements if not resolved to the
satisfaction of PricewaterhouseCoopers LLP would have caused
it to make reference thereto in its reports on the financial
statements for such periods; and (2) there has been no
matter that was the subject of a reportable event (as
defined in Regulation S-K, Item 304(a)(1)(v)).
- Effective as of May 8, 2001, we engaged Deloitte & Touche
LLP as our new independent accountants to audit our
financial statements. During our two most recent fiscal
years ended December 31, 2000 and December 31, 1999, and
through May 2, 2001, we did not consult with Deloitte &
Touche LLP regarding the application of accounting
principles to any transaction or the type of audit opinion
that might be rendered on our financial statements or any
matter that was the subject of a disagreement or reportable
event with the former auditor.
- During its review of our financial statements for the first
quarter of 2001, Deloitte & Touche LLP advised us that it
did not agree with our accounting treatment under SFAS 125
for a portion of a securitization program that contained a
recourse provision. We historically had delayed revenue
recognition with respect to a portion of the securitization
until the recourse provision had expired and our legal
counsel rendered an opinion that such securitization would
be treated as a sale by our special purpose subsidiary. We
submitted this accounting issue for review to the staff of
the Securities and Exchange Commission on May 31, 2001.
After discussion with staff of the SEC, we determined and
communicated to Deloitte & Touche LLP on June 20, 2001 that
it was appropriate to account for our securitization
programs consistent with our historical financial
statements. Deloitte & Touche LLP was offered the
opportunity to accept our position as to the treatment of
our financial statements or to resign. On June 22, 2001,
Deloitte & Touche LLP resigned as our independent
accountants.
- Deloitte & Touche LLP has not, since its appointment by us
on May 8, 2001, reported on any financial statements or
reports filed on behalf of us;
- Our Audit Committee recommended, and our Board of Directors
approved, effective as of June 26, 2001, the decision to
change independent accountants;
- Since Deloitte & Touche LLP's engagement on May 8, 2001, we
have had no disagreements with Deloitte & Touche LLP on any
matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of
Deloitte & Touche LLP would have caused it to make reference
thereto in its reports on the financial statements for such
period, except Deloitte & Touche LLP did not agree with (1)
our position to delay recognizing a sale under SFAS 125 on a
portion of a securitization program until the recourse
provision related to such portion of the securitization
program had expired and we had received a legal opinion that
the securitization would be treated as a sale by our special
purpose subsidiary, as more fully discussed above; and (2)
our preliminary position to treat the stock plan for certain
officers of our home equity line of business as a "fixed"
plan for purposes of expense recognition rather than as a
"variable"
25.
plan. On June 20, 2001, we confirmed to Deloitte & Touche
LLP that we would account for the interest as a "variable"
plan, consistent with its advice. No matter was the subject
of a reportable event (as defined in Regulation S-K, Item
304(a)(1)(v)).
- We engaged PricewaterhouseCoopers LLP as our new independent
accountants as of June 26, 2001. Prior to that date, we had
engaged PricewaterhouseCoopers LLP as our independent
accountants from 1987 through May 2, 2001.
-----------------------------------------------------------------------------
FINANCIAL
INFORMATION
SYSTEMS DESIGN AND
IMPLEMENTATION ALL OTHER
AUDIT FEES FEES FEES
-----------------------------------------------------------------------------
Billed Unbilled
-----------------------------------------------------------------------------
$697,809 $178,190 -0 - $667,302(1)
-----------------------------------------------------------------------------
1. Includes $264,712 of fees related to common stock offering.
Voting Procedures
--------------------------------------------------------------------------------
Shareholders owning a majority of all the common shares
outstanding must be present in person or represented by proxy
in order to constitute a quorum for the transaction of
business. Thus, approximately 13,767,011 shares will be
required at the meeting for such quorum. The three nominees
receiving the greatest number of votes at the meeting, either
in person or by proxy, will be elected as directors for the
ensuing three-year term, as indicated. Proxies returned by
brokers as "non-votes" on behalf of shares held in street name
because the beneficial owner has withheld voting instructions,
and proxies returned with abstentions, will be treated as
present for purposes of determining a quorum but will not be
counted as voting on any matter as to which a non-vote or
abstention is indicated on the proxy.
Annual Report on Form 10-K
--------------------------------------------------------------------------------
We are providing all shareholders with a copy of our Annual
Report on Form 10-K for 2001, together with all financial
statements, schedules, and a list of the Exhibits filed with
the Form 10-K. If any shareholder wishes a copy of the
Exhibits filed with our Annual Report on Form 10-K, we will
furnish the Exhibits without charge. All requests for copies
should be in writing and directed to Gregory F. Ehlinger,
Senior Vice President and Chief Financial Officer, Irwin
Financial Corporation, P. O. Box 929, Columbus, Indiana 47202.
Deadline for Shareholder Proposals for the 2003 Annual Meeting
--------------------------------------------------------------------------------
As required by law, all proposals of our shareholders that are
otherwise eligible for inclusion in our proxy material must be
received at our principal executive offices, 500 Washington
Street, Columbus, Indiana 47201, prior to December 2, 2002, in
26.
order for the proposals to be considered for inclusion in our
proxy statement and form of proxy for the 2003 Annual Meeting.
Miscellaneous
--------------------------------------------------------------------------------
As of the date of this proxy statement, our Board of Directors
has no knowledge of any matters to be presented for
consideration at the meeting other than the matters described
in this proxy statement. If (a) any matters not within the
knowledge of the Board of Directors as of the date of this
proxy statement should properly come before the meeting; (b) a
person not named in this proxy statement is nominated at the
meeting for election as a director because a nominee named in
this proxy statement is unable to serve or for good cause will
not serve; (c) any proposals properly omitted from this proxy
statement and the form of proxy should come before the
meeting; or (d) any matters should arise incident to the
conduct of the meeting, then the proxies will be voted in
accordance with the recommendation of our Board of Directors.
MATT SOUZA, Secretary
March 29, 2002
27.
Appendix A
IRWIN FINANCIAL CORPORATION
Audit Committee Charter
PURPOSE
--------------------------------------------------------------------------------
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing the financial reports
and other financial information provided by the Corporation to shareholders and
others; reviewing the Corporation's system of internal control that management
and the Board of Directors have established; and reviewing the Corporation's
auditing, accounting and financial reporting processes generally. The Audit
Committee derives its authority from the by-laws of Irwin Financial Corporation
and is hereby given all resources and authority necessary to properly discharge
its responsibilities. The Audit Committee's primary duties and responsibilities
are to:
- Provide an open avenue of communication among management, the internal
auditors, the independent accountants, and the Board of Directors.
- Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.
- Review and appraise the audit efforts of the Corporation's independent
accountants and internal auditing department.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated below in the section titled "Duties and
Responsibilities."
COMPOSITION
--------------------------------------------------------------------------------
The Audit Committee will be comprised of three or more directors. All members of
the Committee will be independent directors, and free from any relationship
that, in the opinion of the Board, would interfere with the exercise of his or
her independent judgment as a member of the Committee. An independent director
may not be an employee of the Corporation, a member of the immediate family of
an executive officer of the Corporation, or otherwise associated with a major
vendor to or customer of the Corporation. All members of the Committee will have
a working familiarity with basic finance and accounting practices, such as the
ability to read and understand fundamental financial statements, and at least
one member of the Committee will have accounting or related financial management
expertise.
Committee appointments and selection of the committee chairperson will be
approved annually by the Governance Committee of the Board upon recommendation
by the Chairman of the Board of Directors.
MEETINGS
--------------------------------------------------------------------------------
The Committee will meet at least four times annually, or more frequently as
circumstances dictate. The Committee may ask members of management or others to
attend the meeting and is authorized to receive any and all pertinent
information from management as determined by the Committee. The Committee will
meet with the independent accountants, management, and the director of internal
auditing in separate executive sessions, as deemed necessary, to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee, or at least its Chair, will discuss with
the independent accountants and
28.
management any matters of the types described in the Statement of Auditing
Standards No. 61, Communications with Audit Committees, which are identified in
connection with the accountants reviews of the interim financial statements.
DUTIES AND RESPONSIBILITIES
--------------------------------------------------------------------------------
To fulfill its duties and responsibilities, the Audit Committee shall perform
the following:
General
--------------------------------------------------------------------------------
- The Audit Committee will report its activities to the full Board of Directors
on a regular basis so that the Board is kept informed of its activities on a
current basis. The Committee will perform all duties determined by the Board.
- The Audit Committee has the power to conduct or authorize investigations into
matters within the Committee's scope of responsibilities. The Committee is
authorized to retain independent counsel, accountants, or others it needs to
assist in an investigation.
- The Committee will do whatever else the law, the company's charter or bylaws,
or the Board of Directors may require or direct.
Engagement of Independent Accountants and Internal Auditor
--------------------------------------------------------------------------------
- The Audit Committee will review and recommend to the Board of Directors the
appointment of the independent accountants and review and recommend to the
Board of Directors the discharge of the independent accountants.
- The Audit Committee will oversee the independence of the independent
accountants by reviewing all significant relationships the accountants have
with the Corporation, including a review of management consulting services
provided by the independent accountants and the fees paid for such services.
- The Audit Committee will review and concur, by majority vote, in the
appointment, replacement, reassignment, or dismissal of the Director of
Internal Auditing.
- The Committee will oversee the internal audit function. The Committee will
provide internal audit the authority to examine all records and issue
independent reports in order to provide objectivity to the internal audit
function.
- The Audit Committee will consider, in consultation with the independent
accountants and the director of internal auditing, the audit scope and plans
prepared by the internal auditors and the independent accountants.
- The Audit Committee will request that the director of internal auditing and
the independent accountants coordinate the internal and external audits of the
Corporation in order to avoid duplication of efforts.
Review of Internal and External Audit Work, and the Quarterly and Annual
Financial Statements
--------------------------------------------------------------------------------
- The Audit Committee will ascertain that the independent accountants view the
Board of Directors as their client, that they will be available to the full
Board at least annually, and that they will provide the committee with a
timely analysis of significant financial reporting issues.
29.
- The Audit Committee will review the following with management, the director of
internal audit and the independent accountants:
a.) The adequacy of the company's risk management processes, including any
significant weaknesses in the system of internal control for detecting
and reporting financial errors, defalcations, legal violations, and
noncompliance with the company's code of conduct.
b.) Management's responses indicating action taken or planned to address such
weaknesses.
- The Audit Committee will review the following with management and the
independent accountant:
a.) The company's annual financial statements and related footnotes, as well
as the annual Form 10-K filing with the Securities and Exchange
Commission and whether the information in the filing is consistent with
the information in the financial statements.
b.) The independent accountant's audit of and report on the financial
statements.
c.) The auditor's qualitative judgements about the quality, not just the
acceptability, of accounting principles and financial disclosures.
d.) Any serious difficulties or disputes with management encountered during
the course of the audit.
e.) Other matters related to the conduct of the audit that are to be
communicated to the committee under generally accepted auditing
standards.
- The Audit Committee or its Chair will review with management and the
independent accountant the quarterly Form 10-Q filings with the Securities and
Exchange Commission prior to their submission.
- The Audit Committee will consider and review with management and the director
of internal audit:
a.) The quarterly report provided by the director of internal audit which
summarizes audit activities during the period, including any significant
findings concerning the Corporation's risk management, financial
reporting or compliance systems, as well as management's responses to
them.
b.) The internal audit department's annual audit plan, staffing, and
professional education of the internal audit staff for each calendar
year.
c.) The internal audit department's policy statement.
Other Responsibilities
--------------------------------------------------------------------------------
- Review and update the Audit Committee Charter annually.
- Review with management the results of regulatory examinations of the
Corporation and management's responses to such reports.
- Review the substance of legal and regulatory matters that may have a material
effect on the Corporation's financial statements, including significant issues
raised by internal or outside counsel concerning litigation, contingencies,
claims, or assessments.
- The Committee will receive a briefing of changes in accounting standards or
rules promulgated by the Financial Accounting Standards Board, Securities and
Exchange Commission, or other regulatory bodies, that may have a material
effect on the financial statements.
30.
Irwin Financial Corporation
Annual Shareholder Meeting
April 25, 2002 -- 4:00 p.m. (E.S.T.)
Holiday Inn Conference Center
2480 Jonathan Moore Pike (Route 46)
[MAP TO HOLIDAY INN]
[IRWIN FINANCIAL LOGO]
DETACH HERE
-------------------------------------------------------------------------------
IRWIN FINANCIAL CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby nominate, constitute, and appoint John A. Nash
and William I. Miller and each of them (with full power to act without the
other), with full power of substitution to each, the true and lawful Proxies of
the undersigned to attend the Annual Meeting of the Shareholders of the
Corporation, to be held at the Holiday Inn Conference Center, 2480 Jonathan
Moore Pike, Columbus, Indiana, on Thursday, April 25, 2002, at 4:00 p.m.
(Columbus time), or at any adjournment of the meeting, and to vote all shares of
the Corporation that the undersigned is entitled to vote upon the matters
referred to in this proxy and in the notice of the meeting to the same extent
and with all the powers the undersigned would possess if personally present and
voting at the meeting or at any adjournment of it, and the Proxies are directed
to:
(The Board of Directors recommends a VOTE FOR this proposal.)
(1) The election of the 3 directors listed below, whose terms of office shall
expire as indicated.
[ ]Vote FOR [ ] or WITHHOLD AUTHORITY to vote for
W. I. Miller (2005); J. A. Nash (2005); and T. M. Solso (2005)
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, PRINT
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
--------------------------------------------------------------------------------
(2) Vote in their discretion upon such other business as may properly come
before the meeting or any adjournment thereof.
(Continued on other side)
DETACH HERE
-------------------------------------------------------------------------------
(Continued from other side)
This proxy will be voted as you specify on this proxy card. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED FOR THE
DIRECTORS NAMED IN THE PROXY STATEMENT AND THE PROXIES MAY VOTE IN THEIR
DISCRETION UPON SUCH OTHER MATTERS AS PROPERLY MAY COME BEFORE THE MEETING OR
ANY ADJOURNMENT OF IT.
The undersigned acknowledges receipt of notice of the meeting and the
accompanying proxy statement and hereby revokes all proxies heretofore given by
the undersigned for the meeting.
This proxy may be revoked at any time prior to voting it.
Dated -------------------- , 2002
----------------------------------
Please sign exactly as name(s)
appear(s) here.
----------------------------------
(If there are two or more
co-owners, all must sign.)
Important: Please sign, date, and
return this proxy promptly in the
enclosed envelope. No postage
required if mailed in the United
States.)