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 240.14a-11(c) or rule 240.14a-12
1st Source Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
1st Source Corporation
- --------------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[1st Source Corporation Logo]
100 North Michigan Street
Post Office Box 1602
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 Center, 4th Floor Boardroom, 100 North Michigan Street, South
Bend, Indiana, on April 18, 2000, at 10:00 a.m. local time, for the purpose of
considering and voting upon the following matters:
1. ELECTION OF DIRECTORS. Election of one director for a term expiring in
2001 and four directors for terms expiring in 2003.
2. 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, 2000, are
entitled to vote at the meeting.
By Order of the Board of Directors
Vincent A. Tamburo
Secretary
South Bend, Indiana
March 15, 2000
- --------------------------------------------------------------------------------
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>
[1st Source Corporation Logo]
100 North Michigan Street
Post Office Box 1602
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 18, 2000, at 10:00
a.m. local time, at the 1st Source Center, 4th Floor Boardroom, South Bend,
Indiana. Only Shareholders of record at the close of business on February 14,
2000, will be eligible to vote at the Annual Meeting. The voting securities of
1st Source consist only of Common Stock, of which 19,043,741 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 15, 2000. 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>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Ownership of beneficial owners of more than 5% of the Common Stock outstanding
at February 14, 2000:
<TABLE>
<CAPTION>
Name and Address Type of Ownership Amount % of Class
- ---------------- ----------------- ------ ----------
<S> <C> <C> <C>
Ernestine M. Raclin (1) Indirect(2) 5,697,967 29.92 %
100 North Michigan Street ========= =======
South Bend, IN 46601
Christopher J. Murphy III Direct 593,876 3.12 %
100 North Michigan Street
South Bend, IN 46601 Indirect(3) 1,340,357 7.04 %
--------- -------
Total 1,934,233 10.16 %
========= =======
1st Source Bank as Trustee Direct 1,092,006 5.73 %
for the 1st Source ========= =======
Corporation Employees'
Profit Sharing Plan and Trust
</TABLE>
(1) Mrs. Raclin is the mother-in-law of Mr. Murphy.
(2) Owned indirectly by Mrs. Raclin who disclaims beneficial ownership thereof.
Most of these securities are held in 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.
(3) Owned indirectly by Mr. Murphy who disclaims beneficial ownership thereof.
The securities are held by Mr. Murphy's wife and children, or in trust for
the benefit of his wife and children. Mr. Murphy is not a current income
beneficiary of most of the trusts.
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.
PROPOSAL NUMBER 1: ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
The last Shareholders' meeting at which directors were elected was held on April
15, 1999. At that meeting, 93% of the shares outstanding were represented in
person or by proxy. Directors were voted upon separately. All directors received
a majority of the votes cast.
The Board of Directors is divided into three (3) groups of directors whose terms
expire at different times. At this meeting, one (1) director is to be elected
for a term expiring in 2003 and four (4) directors are to be reelected, one for
a term expiring in 2001 and three for terms expiring in 2003, 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 non-director executive officer
continuing in office.
2
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
of Equity Securities(1)
-----------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation(3) Assumed Stock(2) Class
- ---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
NOMINEE FOR ELECTION TO THE BOARD OF DIRECTORS
Term Expiring in April, 2003
Claire C. Skinner 45 Chairman of the Board and 1,210 *
Chief Executive Officer,
Coachmen Industries, Inc.
(recreational vehicle and
modular home manufacturer)
NOMINEES FOR REELECTION TO THE BOARD OF DIRECTORS
Term Expiring in April, 2001
Paul R. Bowles 62 Former Vice President, 1988 9,900 *
Corporate Development,
Clark Equipment Company
(off-highway components
and construction machinery
manufacturing)
Terms Expiring in April, 2003
Rev. E. William
Beauchamp, C.S.C 57 Executive Vice President, 1989 557 *
University of Notre Dame
William P. Johnson 57 Chief Executive Officer, 1996 881 *
Goshen Rubber Co., Inc.
(rubber and plastic parts
manufacturer); Director,
Coachmen Industries, Inc.
Richard J. Pfeil 67 Chairman and President, 1971 31,303 *
Koontz-Wagner Electric
Company, Inc. (electrical
equipment installer and
supplier)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
of Equity Securities(1)
-----------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation(3) Assumed Stock(2) Class
- ---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
DIRECTORS CONTINUING IN OFFICE
Terms Expiring in April, 2001
Daniel B. Fitzpatrick 42 Chairman, President, 1995 20,744 *
Chief Executive Officer
and Director, Quality
Dining, Inc. (quick
service and casual dining
restaurant operator)
Wellington D. Jones III 55 Executive Vice President, 1998 193,959 1.02%
1st Source Corporation,
and President and Chief
Operating Officer, 1st Source
Bank; prior thereto, Executive
Vice President, 1st Source
Corporation and 1st Source
Bank
Dane A. Miller, Ph.D. 54 President, Chief Executive 1987 17,056 *
Officer and Director,
Biomet, Inc. (medical
products and technology)
Terms Expiring in April, 2002
Lawrence E. Hiler 54 Chairman, Hiler Industries 1992 1,965 *
(metal castings)
Rex Martin 48 Chairman, President and 1996 1,512 *
Chief Executive Officer,
NIBCO, Inc. (copper and
plastic plumbing parts
manufacturer)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership
of Equity Securities(1)
-----------------------
Year
in Which
Directorship Common % of
Name Age Principal Occupation(3) Assumed Stock(2) Class
- ---- --- ----------------------- ------- -------- -----
<S> <C> <C> <C> <C> <C>
Christopher J. Murphy III 53 Chairman of the Board, 1972 1,934,233 10.16%
President, and Chief
Executive Officer, 1st Source
Corporation; Chairman of
the Board and Chief Execu-
tive Officer, 1st Source Bank; prior
thereto, President and Chief
Executive Officer, 1st Source
Corporation and 1st Source Bank; and
Director, Quality Dining, Inc.
Timothy K. Ozark 50 Chairman and Chief Executive 1999 1,500 *
Officer, Aim Financial Corpora-
tion (mezzanine funding and
leasing); President and Chief
Executive Officer, TKO Finance
Corporation (lender to financial
services and manufacturing
companies)
NON-DIRECTOR EXECUTIVE OFFICERS
Richard Q. Stifel 58 Executive Vice President, 80,962 *
1st Source Bank
Allen R. Qualey 47 President and Chief Operating 55,413 *
Officer, Specialty Finance
Group, 1st Source Bank; prior
thereto, Executive Vice President
and Senior Vice President
Vincent A. Tamburo 65 Senior Vice President, General 63,680 *
Counsel and Secretary, 1st Source
Corporation and 1st Source Bank
Larry E. Lentych 53 Senior Vice President, 52,328 *
Treasurer and Chief Financial
Officer, 1st Source Corporation
and 1st Source Bank
All Directors and Executive Officers as a Group (16 persons) 2,467,203 12.96%
</TABLE>
5
<PAGE>
* Represents holdings of less than 1%.
(1) Based on information furnished by the directors and executive officers as of
February 14, 2000.
(2) The amounts shown include shares of Common Stock held directly or indirectly
in the following amounts by the spouse and other family members of the
immediate household of the following director, who disclaims beneficial
ownership of such securities: Christopher J. Murphy III, 1,340,357 shares.
Voting authority for 958,146 shares owned beneficially by Mr. Murphy 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.
(3) 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.
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 1999; 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.
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 were Christopher J.
Murphy III, Chairman; Paul R. Bowles, Philip J. Faccenda, Daniel B. Fitzpatrick,
Rex Martin, and Richard J. Pfeil. The committee did not meet in 1999. 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 15
, 2001. Nominations should be addressed to the attention of the Chairman,
Executive Committee, c/o 1st Source Corporation.
AUDIT COMMITTEE -- Members of the Audit Committee were William P. Johnson,
Chairman; Rev. E. William Beauchamp, Philip J. Faccenda, Rex Martin, Dane A.
Miller, Timothy K. Ozark and Richard J. Pfeil, 1st Source Directors; H. Thomas
Jackson, John T. Phair and Elmer H. Tepe, 1st Source Bank Directors. The
committee held three meetings in 1999. The function of the Audit Committee is to
select the Company's outside independent accountants and 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.
6
<PAGE>
HUMAN RESOURCES COMMITTEE-- Members of the Human Resources Committee were Terry
L. Gerber, 1st Source Bank Director, Chairman; Paul R. Bowles, Daniel B.
Fitzpatrick, and Lawrence E. Hiler, 1st Source Directors; Ann M. Hillman, Hollis
E. Hughes, Jr., Craig A. Kapson, David L. Lerman and Mark D. Schwabero, 1st
Source Bank Directors. The committee held three meetings in 1999. 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 were Philip J. Faccenda, Chairman; Paul R. Bowles, Rex Martin and
Richard J. Pfeil. The committee held two meetings in 1999. 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 six meetings in 1999. 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
and William P. Johnson. 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 1999 were $156,550.
REMUNERATION OF EXECUTIVE OFFICERS
The following tables set forth all aggregate remuneration accrued by 1st Source
and its subsidiaries for 1999 for 1st Source's chief executive officer and each
of 1st Source's other four most highly compensated executive officers.
7
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
(A) (B) (C) (D) (E) (F) (G) (H)
Securities
Other Annual Underlying LTIP All Other
Name and Principal Position(1) Year Salary Bonus (2) Compensation Options (#Sh) Payouts(2) Compensation(3)
- ------------------------------ ---- ------ --------- ------------ ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Christopher J. Murphy III 1999 $492,308 $1,022,493 $21,733 - $237,863 $108,558
Chairman, President & CEO, 1998 461,592 891,780 25,680 110,000 243,151 133,716
1st Source, and Chairman 1997 414,515 633,405 25,190 - 217,463 13,989
& CEO, 1st Source Bank
Wellington D. Jones III 1999 259,553 45,357 16,179 - 81,234 14,544
Executive Vice President 1998 249,335 59,500 10,953 55,000 78,120 14,544
1st Source, and President 1997 202,145 656,613 6,190 - 70,826 13,989
& COO, 1st Source Bank
Allen R. Qualey 1999 180,538 50,209 3,346 - 47,607 14,544
President and COO, 1998 173,077 46,350 2,809 55,000 41,787 14,544
Specialty Finance Group, 1997 145,385 34,050 2,536 12,100 36,278 13,989
1st Source Bank
Richard Q. Stifel 1999 174,035 23,404 4,515 - 45,336 14,544
Executive Vice President 1998 169,610 24,875 4,246 33,000 47,549 14,544
1st Source Bank 1997 152,461 207,505 4,133 - 43,771 13,989
Larry E. Lentych 1999 139,510 21,115 1,746 - 31,561 14,279
Senior Vice President, 1998 135,890 26,850 1,634 33,000 47,354 12,968
Treasurer and CFO,
1st Source and 1st Source Bank
</TABLE>
8
<PAGE>
(1) Mr. Murphy, Mr. Jones, Mr. Qualey, Mr. Stifel, and Mr. Lentych (the
"Executives") signed Employment Agreements (the "Agreements") in April 1998.
Mr. Murphy's Agreement provides for a $525,000 base salary, with annual
increases of not less than 5% and cash bonus payments based on a formula
computed in a manner similar to the awards to executives under the Executive
Incentive Plan and Long-Term Executive Award Program. Under the other four
Agreements Mr. Jones, Mr. Qualey, Mr. Stifel and Mr. Lentych will receive
base salaries of $250,000, $175,000, $165,000 and $135,000, respectively,
with annual increases as may be determined by 1st Source, and cash and stock
bonuses determined under the Executive Incentive Plan and the Long-Term
Executive Award Program. The Agreements permit gross- up payments necessary
to cover possible excise tax payments by the Executives and to reimburse the
Executives for legal fees that might be expended in enforcing the
Agreements' provisions or contesting tax issues relating to the Agreements'
parachute provisions. Mr. Murphy's Agreement is a five-year agreement which
is extended from year to year unless either party gives notice not to
extend. The Agreements for Mr. Jones, Mr. Qualey, Mr. Stifel, and Mr.
Lentych expire on December 31 of the years 2003, 2003, 2001, and 2001,
respectively. In each case their Agreement will be extended from year to
year thereafter unless either party gives notice not to extend. If any of
the Executives terminate employment because of any adverse change in their
status, he will continue to receive his base salary for a period of twelve
months after his termination. If any of the Executives terminate employment
within one year of a change in control (which term includes any third party
which becomes beneficial owner of 50%, or in the case of Mr. Murphy, 20%, or
more of the outstanding stock of 1st Source, the election of a majority of
new directors in connections with a sale, merger, other business combination
or contested Board of Directors election, or any approval of any transaction
which results in a disposition of substantially all of the assets of 1st
Source), he will receive severance pay in cash equal to 2.99 times his
"Annualized Includable Compensation" (as defined under the Internal Revenue
Code of 1986, as amended.) The Agreements also include restrictive covenants
which provide, among other things, that the Executives not compete with 1st
Source in bank or bank-related services within certain designated counties
of Indiana or divulge confidential information or trade secrets for a
twenty-four month period after termination of employment. In the event of
disability, the Executives will receive their base salary for up to one
year, in addition to other disability programs in effect for all officers of
1st Source. Additionally, 1st Source has entered into a split-dollar life
insurance agreement with Mr. Murphy which insures the lives of Mr. Murphy
and his wife for $10.2 million.
(2) 1st Source has an Executive Incentive Plan (the "Plan") and a Performance
Compensation Plan which are 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>
The bonus amounts represent the annual cash awards under the Plan, the 1998
Performance Compensation Plan and other cash bonuses. Vested stock under the
Plan, the Awards and the Restricted Plan is included in the LTIP Payouts 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, 1999, are as follows:
Book Value Market Value Calculated
Name Shares Shares Value
- ---- ---------- ------------ ----------
Christopher J. Murphy III 32,576 5,210 $542,011
Wellington D. Jones III 12,268 1,413 190,393
Allen R. Qualey 11,036 1,030 165,245
Richard Q. Stifel 5,933 947 98,668
Larry E. Lentych 5,143 614 80,358
(3) For 1999 and 1998 Mr. Murphy's amount in the "All Other Compensation" column
includes $94,014 and $119,172 for the current value on an actuarial basis of
his split-dollar life insurance agreement. All other amounts reported in the
"All Other Compensation" column represent 1st Source contributions to
defined contribution retirement plans.
EXECUTIVE INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
Number of Performance
Book Value Period Until
Name Shares(1) Payout(2)
- ---- ---------- ------------
Christopher J. Murphy III 10,149 5 years
Wellington D. Jones III 3,589 5 years
Allen R. Qualey 3,973 5 years
Richard Q. Stifel 1,852 5 years
Larry E. Lentych 1,671 5 years
(1) Mr. Murphy will receive his vested awards in cash.
(2) Vesting of awards is tied to 1st Source achieving an 8% annual increase in
net income over the next five years. Twenty percent (20%) of the award
vests each year based on attaining the performance.
10
<PAGE>
PENSION PLAN BENEFITS
Annual pension benefits payable to executive officers under annuity contracts
received from the terminated Pension Plan are as follows:
Annual Pension
Name Benefits
---- --------------
Christopher J. Murphy III $17,078
Wellington D. Jones III 6,694
Richard Q. Stifel 3,879
Larry E. Lentych 4,827
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, Mr. Murphy served as a member of the compensation committee of
Quality Dining, Inc. Director Fitzpatrick is an executive officer of Quality
Dining, Inc.
EXECUTIVE COMPENSATION COMMITTEE REPORT
1st Source officers are reviewed annually by their immediate supervisor. The
review includes assessment of management performance and achievement of
individual, group, and company goals.
The performance review is a normal 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 in
effect for the year 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. In January,
2000, we reviewed Mr. Murphy's salary. We reviewed his performance against the
Company's 1999 Plan and his progress toward achieving the Company's long-term
plan. The Company had again exceeded its quantitative and qualitative objectives
in 1999. We determined that Mr. Murphy's performance "substantially and
consistently exceeds job requirements," and he was therefore eligible to receive
a 6% to 8% base salary increase. We determined it to be in the best interest of
the Company to increase Mr. Murphy's salary to $525,000 effective March, 2000.
11
<PAGE>
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 25%
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 1999, the Company continued the expansion of its branch network, generally
exceeded its annual financial goals and generally met its qualitative
objectives. Accordingly, Mr. Murphy was awarded a bonus of $256,564 for 1999's
performance.
Under the Company's Executive Incentive Plan, 50% of the Executive Incentive
Plan bonus will be paid in cash in March 2000 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 8% 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.
In addition, the Executive Compensation Committee awarded Mr. Murphy a cash
bonus of $894,211 under the 1998 Performance Compensation Plan approved by the
shareholders and based on goals established by us at the beginning of 1999. This
bonus was awarded in recognition of 1st Source's achievement of those goals, as
well as 1st Source's continued excellent financial performance in comparison
with its peer bank holding companies.
EXECUTIVE COMPENSATION COMMITTEE
Philip J. Faccenda, Chairman
Paul R. Bowles
Rex Martin
Richard J. Pfeil
OPTION GRANTS IN LAST FISCAL YEAR
There have been no option grants to executive officers in the last fiscal year.
12
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 1999 OPTION VALUES
(a) (b) (c) (d) (e)
Number of Value of Unexercised
Securities Underlying In-the-Money
Unexercised Options at Options at
December 31, 1999 December 31, 1999
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Christopher J. Murphy III 98,490 $2,561,141 363,025 21,417 $4,302,092 $241,635
Wellington D. Jones III 3,752 70,003 62,320 8,289 82,587 93,520
Allen R. Qualey 1,200 23,950 93,080 13,310 512,422 119,259
Richard Q. Stifel 1,150 21,587 56,328 5,929 319,491 66,893
Larry E. Lentych 650 14,760 56,727 4,356 339,452 49,146
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG 1ST SOURCE, NASDAQ MARKET INDEX AND PEER GROUP INDEX**
[GRAPH}
31-Dec-94 31-Dec-95 31-Dec-96 31-Dec-97 31-Dec-98 31-Dec-99
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1st Source 100 142 158 260 304 252
NASDAQ Index 100 130 161 197 278 490
Peer Group 100 146 194 332 368 306
</TABLE>
* Assumes $100 invested on December 31, 1994, in 1st Source Corporation common
stock, NASDAQ market index, and peer group index.
** 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.
14
<PAGE>
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.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The financial statements of 1st Source are audited annually by independent
accountants. For the year ended December 31, 1999, and the ten (10) preceding
years, the audit was performed by PricewaterhouseCoopers LLP, South Bend,
Indiana. Representatives of the firm of PricewaterhouseCoopers LLP will be
available to respond to questions during the Annual Meeting. These
representatives have indicated that they do not presently intend to make a
statement at the Annual Meeting. 1st Source plans to select its independent
accountants for the year ending December 31, 2000 in July 2000.
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, 2000.
15
<PAGE>
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 10-K 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, 1999, 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 15, 2000
16
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Christopher J. Murphy III, Larry E. Lentych 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 18, 2000 and at any and all adjournments
thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for 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.
TERM EXPIRES APRIL, 2001: Paul R. Bowles
TERM EXPIRES APRIL, 2003: Rev. E. William Beauchamp, CSC Richard J. Pfeil
William P. Johnson Claire C. Skinner
2. 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 Logo]
Post Office Box 1602
South Bend, Indiana 46634
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.
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.
------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.
------------------------------------------------
-----------------------------------------------------------------
Signature
-----------------------------------------------------------------
Signature if held jointly
Dated: ----------------------------------------------------, 2000
