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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
FIRST FINANCIAL CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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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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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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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540
TERRE HAUTE, INDIANA 47808
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 2005
Notice is hereby given that, pursuant to the call of its Directors, an
Annual Meeting of Shareholders of First Financial Corporation ("Corporation")
will be held on April 20, 2005 at 11:00 o'clock a.m., local time, at One First
Financial Plaza, Terre Haute, Indiana.
The purposes of the meeting are:
(1) To elect B. Guille Cox, Jr., Anton H. George, Gregory L. Gibson and
Virginia L. Smith to the Board of Directors of the Corporation for a
three (3) year term to expire in 2008;
(2) To elect B. Curtis Brighton to the Board of Directors of the
Corporation for a two (2) year term to expire in 2007;
(3) To transact such other business as may properly be presented at the
meeting.
Only shareholders of record at the close of business on March 16, 2005 will
be entitled to notice of and to vote at the meeting.
By Order of the Board of Directors
/s/ DONALD E. SMITH
DONALD E. SMITH
Chairman of the Board and President
March 22, 2005
IMPORTANT - PLEASE MAIL YOUR PROXY PROMPTLY
IN ORDER THAT THERE MAY BE PROPER REPRESENTATION AT THE MEETING, YOU ARE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
PROXY STATEMENT OF
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540 o TERRE HAUTE, INDIANA 47808
(812) 238-6000
-----------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 2005
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of First Financial Corporation (the "Corporation") of Proxies
for use at the Annual Meeting of Shareholders of the Corporation to be held on
April 20, 2005, at 11:00 a.m. local time at One First Financial Plaza, Terre
Haute, Indiana, and at any and all adjournments of such meeting. This Proxy
Statement and accompanying form of proxy were first mailed to the shareholders
on or about March 30, 2005.
The Corporation is a financial services holding company which owns First
Financial Bank N.A. ("FFB"), First State Bank, First Crawford State Bank, The
Morris Plan Company of Terre Haute, Inc., First Community Bank N.A., Forrest
Sherer, Inc. and First Financial Reinsurance Company, Ltd.
Only shareholders of record as of March 16, 2005, will be entitled to notice of,
and to vote at, the Annual Meeting. As of March 10, 2005 the Corporation had
issued and outstanding 13,505,938 shares of common stock, which were held by
approximately 908 shareholders of record. There are no other outstanding
securities of the Corporation entitled to vote. On the matters to be voted on at
this Annual Meeting, each share is entitled to one vote, exercisable in person
or by proxy.
The presence, in person or by proxy, of a majority of the outstanding shares of
Common Stock is necessary to constitute a quorum. Shares voting, abstaining or
withholding authority to vote on any issue will be counted as present for
purposes of determining a quorum. Approval by a plurality of the votes cast at
the meeting, assuming a quorum is present, is required for election of each
nominated director. Action on any other matters to come before the meeting must
be approved by an affirmative vote of a majority of the shares present, in
person, or by proxy. Abstentions, broker non-votes, and instructions on the
accompanying proxy card to withhold authority to vote for one or more of the
named nominees will result in the respective nominee receiving fewer votes.
The cost of soliciting proxies will be borne by the Corporation. In addition to
use of the mails, proxies may be solicited personally, electronically or by
telephone by officers, directors and certain employees who will not be specially
compensated for such soliciting.
Any shareholder giving a proxy has the right to revoke it at any time before it
is exercised. Therefore, execution of the proxy will not affect the
shareholder's right to vote in person if he or she attends the meeting.
Revocation may be made prior to the meeting (i) by written notice sent to
Michael A. Carty, Secretary, First Financial Corporation, One First Financial
Plaza, P.O. Box 540, Terre Haute, Indiana 47808, (ii) personally upon oral or
written request at the Annual Meeting, or (iii) by duly executing a proxy
bearing a later date.
The shares represented by proxies will be voted as instructed by the
shareholders giving the proxies. In the absence of specific instructions to the
contrary, proxies will be voted in favor of the election as directors of the
five (5) persons named as nominees in this Proxy Statement. If for any reason
any of the director/nominees becomes unable or is unwilling to serve at the time
of the meeting (an event which the Board of Directors does not anticipate), the
persons named as proxies in the accompanying form of proxy will have
discretionary authority to vote for a substitute nominee or nominees named by
the Corporate Governance/Nominating Committee if the Board of Directors elects
to fill such nominees' position. If any other shareholder proposal intended to
be presented at the 2005 Annual Meeting was not received by the Corporation on
or before February 6, 2005, the proxies will have discretionary authority to
vote on the matter. Any other matters that may properly come before the meeting
will be acted upon by the persons named as proxies in the accompanying form of
proxy in accordance with his or her discretion.
ELECTION OF DIRECTORS
The Board of Directors is currently composed of eleven (11) members. The
Corporation's Articles of Incorporation divide the Board of Directors into three
classes, as nearly equal in size as possible, with one class of directors
elected each year for a term extending to the third succeeding Annual Meeting
after such election. The nominees for election as director are nominated to
serve for terms to expire in 2008 with the exception of director Brighton, who
has been nominated to complete a term to expire in 2007. Each nominee is a
current director of the Corporation. The following information is provided
concerning each nominee and each incumbent director continuing in office.
CERTAIN INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding directors, nominees
and the Named Executive Officers of the Corporation, including beneficial
ownership of the Corporation's common stock as of March 10, 2005, by each of the
Corporation's directors, nominees and the Named Executive Officers; and all
current directors and executive officers as a group.
1
SHARES OF COMPANY COMMON STOCK
NAME, AGE AND PRINCIPAL OCCUPATION DIRECTOR BENEFICIALLY OWNED ON MARCH 10, 2005
DURING THE PAST FIVE YEARS SINCE NUMBER PERCENT OF CLASS (1)
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NOMINEES FOR TERMS TO EXPIRE IN 2008
B. Guille Cox, Jr., 59 1987 85,596 .63%(2)
Attorney-at-Law with Cox Zwerner Gambill & Sullivan
Anton H. George, 45 1989 618 .01%
President of Indianapolis Motor Speedway Corp.;
Director of Vectren Corporation
Gregory L. Gibson, 42 1994 66,962 .50%
President of ReTec, Inc.
Virginia L. Smith, 56 1987 6,134 .05%
President of R.J. Oil, Inc.
NOMINEE FOR TERM TO EXPIRE IN 2007
W. Curtis Brighton, 51 2004 10,000 .07%
Executive Vice President and General Counsel
Hulman & Company
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
WHOSE TERMS EXPIRE IN 2006
Thomas T. Dinkel, 54 1989 10,870 .08%
President of Sycamore Engineering, Inc.
Norman L. Lowery, 58, Vice Chairman of the 1989 19,650 .15%(3)
Board and CEO; Vice President of the Corporation;
President of First Financial Bank N.A.
Patrick O'Leary, 68 1983* 51,815 .38%
President of Contract Services, LLC
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS
WHOSE TERMS EXPIRE IN 2007
Chapman J. Root II, 55 1989 34,094 .25%
Board Member of Root Organization
William A. Niemeyer, 82 1983* 33,260 .25%
President of Niemeyer Coal Co.
Donald E. Smith, 78 1983* 151,593 1.12%
Chairman of the Board and President
* First Financial Corporation was formed in 1983.
OTHER EXECUTIVE OFFICERS OF THE CORPORATION
Thomas S. Clary, 53 0 0%
Senior Vice President & CCO of First Financial Bank N.A.
Michael A. Carty, 54, Secretary/Treasurer 13,876 .10%
Senior Vice President & CFO of First Financial Bank N.A.
Richard O. White, 57 19,269 .14%
Senior Vice President of First Financial Bank N.A.
All Directors and Executive Officers as a group have 508,455 shares, which is
3.76% of the shares outstanding. This includes shares held for the accounts of
Donald E. Smith, Norman L. Lowery, Thomas S. Clary, Michael A. Carty and Richard
O. White in the First Financial Corporation Employee Stock Ownership Plan.
(1) The information contained in this column is based upon stockholder records
of the Corporation and information furnished to the Corporation by the
individuals identified above.
(2) Mr. Cox, under certain circumstances, has the power, with the consent of
others, to vote an additional 339,906 shares (2.52%). These shares are not
reflected in the amount on this page.
(3) Mr. Lowery has the power to vote an additional 133,334 (.99%) shares as
co-trustee of the Root Children's Business Trust. These shares are not reflected
in the amount on this page.
2
The Corporation's executive officers served as executive officers of the
Corporation for the following periods:
NAME AND EXECUTIVE OFFICER POSITION EXECUTIVE OFFICER SINCE
----------------------------------------------------------------------------------------------------------
Donald E. Smith, Chairman and President 1983
Norman L. Lowery, Vice Chairman and CEO 1996
Michael A. Carty, Secretary, Treasurer, Senior Vice President and CFO 1983
Richard O. White, Senior Vice President of First Financial Bank N.A. 1983
Thomas S. Clary, CCO and Senior Vice President of First Financial Bank N.A. 2002
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS
DIRECTOR INDEPENDENCE. The Board of Directors has determined that under the
rules of the NASDAQ Stock Market, a majority of the Board of Directors is
comprised of independent directors, and that the following directors are
independent: Messrs. Brighton, Root, Niemeyer, George, Gibson, Dinkel and
O'Leary.
ATTENDANCE AT MEETINGS. During 2004 the Board of Directors of the Corporation
held 12 regular meetings and a total of 17 meetings. No incumbent director
attended fewer than 75% of the aggregate number of Board meetings and meetings
of committees on which he or she served. Eleven directors attended the 2004
Annual Meeting of Shareholders.
CERTAIN RELATIONSHIPS. Certain family relationships exist among the directors of
the Corporation. Donald E. Smith is the father of Virginia L. Smith and
father-in-law of Norman L. Lowery. There are no arrangements or understandings
between any of the directors pursuant to which any of them have been selected
for their respective positions.
CODE OF BUSINESS CONDUCT AND ETHICS. The Corporation has adopted a Code of
Business Conduct and Ethics (the "Code") that applies to all of the
Corporation's directors, officers and employees, including its principal
executive officer, principal financial officer, principal accounting officer and
controller. The Code is posted on the Corporation's website at
www.first-online.com. The Corporation intends to disclose any amendments to the
Code by posting such amendments on its website. In addition, any waivers of the
Code for directors or executive officers of the Corporation will be disclosed in
a report on Form 8-K.
COMMITTEES:
GOVERNANCE/NOMINATING COMMITTEE. Members consist of Messrs. O'Leary, Root and
Niemeyer. The Board of Directors has determined that Messrs. O'Leary, Root and
Niemeyer are independent under Rule 10A-3 of the SEC and the rules of the NASDAQ
Stock Market. The Governance/Nominating Committee identifies director nominees
through a combination of referrals, including management, existing board
members and shareholders. This Committee met two times during 2004. A copy of
the charter of this Committee is available on the Corporation's web site at
www.first-online.com. There are five director nominees for the 2005 Annual
Meeting, all of whom are incumbent directors.
AUDIT COMMITTEE. Members for 2004 consisted of Anton H. George, Thomas T. Dinkel
and Patrick O'Leary. The Board of Directors has determined that Messrs. George,
Dinkel and O'Leary are independent under Rule 10A-3 of the SEC and the rules of
the NASDAQ Stock Market. The Committee reviews the Corporation's operations and
management, accounting functions, the adequacy and effectiveness of the
internal controls and internal auditing methods and procedures and is
responsible for the appointment, compensation, retention and oversight of the
independent public accountants for the Corporation. The Audit Committee had four
meetings during 2004. A copy of the charter of this Committee is attached as
Exhibit A to this proxy statement and is posted on the Corporation's website at
www.first-online.com.
A current member of the Audit Committee is financially sophisticated under
applicable NASDAQ rules. The Board of Directors selected the members of the
Audit Committee based on the Board's determination that they are fully qualified
to monitor the performance of management, the public disclosures by the
Corporation of its financial condition and performance, our internal accounting
operations and our independent auditors. In addition, the Audit Committee has
the ability on its own to retain independent accountants or other consultants
whenever it deems appropriate.
The Board of Directors has determined that the Corporation currently does not
have a director who qualifies as a "financial expert" under federal securities
laws. To be considered a "financial expert," an individual's past experience
generally must include experience in the preparation or audit of comparable
public company financial statements, or the supervision of someone in the
preparation or audit of comparable public company financial statements.
The Corporation is actively engaged in recruiting a "financial expert" to serve
as a member of the Board of Directors and as a member of the Audit Committee.
While it might be possible to recruit a person who meets these qualifications of
a "financial expert," the Board has determined that in order to fulfill all the
functions of our Board and our Audit Committee, each member of our Board and our
Audit Committee, including any "financial expert," should ideally understand
community banking and understand the markets in which the Corporation operates,
and that it is not in the best interests of our Corporation to nominate as a
director someone who does not have all the experience, attributes and
qualifications we seek.
COMPENSATION COMMITTEE. Members consist of Messrs. George, O'Leary and Niemeyer.
The Board of Directors has determined that Messrs. George, O'Leary and Niemeyer
are independent under Rule 10A-3 of the SEC and the rules of the NASDAQ Stock
Market. The Compensation Committee approves the compensation of the officers of
the Corporation and its subsidiaries. Such Committee met three times in 2004.
COMPENSATION OF DIRECTORS. Each director of the Corporation is also a director
of FFB, the lead subsidiary bank of the Corporation, and receives directors'
fees from each organization. During 2004 a director of the Corporation and FFB
received a fee of $750 for each board meeting attended.
3
Non-employee directors also receive a fee for meetings attended of the Audit
Committee of $1,000, the Compensation Committee of $1,000, the
Governance/Nominating Committee of $1,000 and the Loan Discount Committee of
$300. Each director also received from FFB a semi-annual director's fee of
$2,500 on July 15th and December 16th. No non-employee director served as a
director of any other subsidiary of the Corporation.
Directors of the Corporation and FFB who are not yet 70 years of age may
participate in a deferred director's fee program at each institution. Under this
program, a director may defer $6,000 of his or her director's fees each year
over a five-year period. When the director reaches age 65 or age 70, the
director may elect to receive payments over a ten-year period. The amount of the
deferred fees is used to purchase an insurance product which funds these
payments. Each year from the initial date of deferral until payments begin at
age 65 or 70, the Corporation accrues a non-cash expense which will equal in the
aggregate the amount of the payments to be made to the director over the
ten-year period. The Corporation expects that the cash surrender value of the
insurance policy will offset the amount of expenses accrued. If a director fails
for any reason other than death to serve as a director during the entire
five-year period, or the director fails to attend at least 60 regular or special
meetings, the amount to be received at age 65 or 70, as applicable, will be
prorated appropriately. For 2004, the allocated cost of the deferred directors'
fees was $123,405.
Directors also may be compensated under the Corporation's 2001 Long-Term
Incentive Plan, discussed under "Report of the Compensation Committee on
Executive Compensation." Under the plan, directors may receive 90, 100 or 110
percent of the director's "award amount" if the Corporation and FFB attain
certain goals established by the Compensation Committee. For 2004, each director
received pursuant to the 2001 Long-Term Incentive Plan an award of $35,400 from
the Corporation, which represented 100 percent of the director's "award amount"
under the plan for 2004.
COMPENSATION OF OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Decisions on compensation of the Corporation's executives are made by the
Compensation Committee of the Board, which also serves as the Compensation
Committee of FFB. The Board of Directors has determined that each member of the
Compensation Committee is "independent" under Rule 10A-3 of the SEC and the
rules of the NASDAQ Stock Market. All decisions of the Compensation Committee
relating to the compensation of the Corporation's executive officers are
reviewed and ratified by the full Board.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS. The Compensation Committee's
executive compensation policies are designed to provide competitive levels of
compensation to the executive officers and to reward officers for satisfactory
individual performance and for satisfactory performance of the Corporation as a
whole. The individual goals established in the strategic plan and budget for the
Corporation and FFB, and the goals relating to performance of the Corporation
established under the 2001 Long-Term Incentive Plan discussed below, are also
utilized in setting compensation levels of executive officers.
BASE SALARY. Base salary for an executive officer is determined after the
executive officer is reviewed by the Compensation Committee. This review
includes an analysis of the performance of the Corporation and FFB and an
analysis of the individual's performance during the past fiscal year, with a
focus on the executive officer's quality and quantity of work; supervisory
skills; dependability; initiative; attendance; overall skill level; and overall
value to the Corporation. This analysis also includes a comparison of actual
individual performance versus established strategic planning and budgetary
goals.
ANNUAL BONUS AMOUNTS. The Compensation Committee determines whether a bonus
should be paid based primarily upon the overall performance of the Corporation.
For 2004, Mr. Smith received a bonus of $150,000 and Messrs. Lowery, Carty,
Clary and White each received a bonus of $150,000, $19,000, $16,000 and $16,000,
respectively.
LONG-TERM INCENTIVE PLAN. Beginning in 1999 the Board began discussions with
several consultants regarding compensation programs. These consultations and
discussions focused on an analysis of compensation programs of other financial
institutions and what actions were needed to provide comparable compensation
packages to directors, officers and key employees. These discussions and the
analysis of the information received culminated with the adoption by the Board
in November 2000 of the 2001 Long-Term Incentive Plan, effective January 1,
2001. The plan expires on December 31, 2009.
This plan was adopted after lengthy Board discussions with and consultation from
Clarke Bardes Consulting. The plan is designed to enhance stockholder value of
the Corporation by attracting and retaining directors, officers and other key
employees and provide further incentive for directors, officers and other key
employees to give their maximum effort to the continued growth and success of
the Corporation. This is an unfunded, nonqualified plan of deferred compensation
which is administered by the Compensation Committee.
Directors and executive officers who are "highly compensated employees" within
the meaning of Section 201(2) of ERISA, and who are age 65 or under are eligible
to participate in the plan. The Compensation Committee has designated as
participants in the plan all directors of the Corporation, the executive
officers listed in the summary compensation table below, the presidents of its
subsidiary banks and certain other officers. Individuals are not eligible to
receive rewards of compensation under the plan after age 65. The Compensation
Committee exempted Messrs. Smith, Niemeyer and O'Leary from the age limitations
of the plan at the plan's inception.
Rewards of compensation under the plan are based upon the specific "award
amount" for each individual specified in the plan. There are four tiers of
participants in the plan, with a different award amount specified for each tier.
The award amounts were established after discussions with and receipt of advice
from the Corporation's consultant, who had performed an analysis of a peer group
of companies for the Corporation and the financial institution industry
generally.
4
Rewards of compensation equal 90, 100 or 110 percent of the individual's award
amount. The percentage of the award made is dependent upon whether the
Corporation and the subsidiary banks attain either the first, second or third
target level of performance goals established by the Compensation Committee
for the Corporation and each subsidiary bank. If the first target level is not
attained, no award is made. If the first, second or third levels of the
performance goals are attained, the award will equal 90, 100 or 110 percent of
the award amount, respectively.
Payments under the plan generally do not begin until the earlier of January 1,
2015, or the January 1 immediately following the year in which the participant
reaches age 65. Payments are in cash only and are generally made in 180 equal
consecutive monthly installments.
Directors and executives become 100 percent vested in their awards if or when
they have provided five years of service to the Corporation or the respective
subsidiary.
Awards for 2004 were based on a weighted point total of the following target
goals for the Corporation and its subsidiary banks: return on average assets,
return on average equity, net after-tax income and corporate earnings per share.
The Corporation and most of its affiliate banks each attained the second target
level for 2004, which resulted in directors and executive officers receiving
rewards under the plan equal to 100% of the individual's award amount. Two
region managers and one product manager attained the first target level
resulting in a 90% individual award amount.
OTHER COMPENSATION PLANS. At various times in the past the Corporation has
adopted certain broad-based employee benefit plans in which the executive
officers are permitted to participate on the same terms as other Corporation
employees who meet applicable eligibility criteria, subject to any legal
limitations on the amount that may be contributed or the benefits that may be
payable under the plans.
BENEFITS. The Corporation provides certain other benefits to the executive
officers which did not exceed 10% of salary and bonus for fiscal 2004.
CHIEF EXECUTIVE OFFICER'S 2004 COMPENSATION. The Compensation Committee
recommends Mr. Lowery's salary and bonus in the same manner as discussed above
for other executives.
MEMBERS OF THE 2004 COMPENSATION COMMITTEE
Patrick O'Leary, Compensation Committee Chairman
- Anton H. George - William A. Niemeyer
SUMMARY COMPENSATION TABLE
The following table sets forth for each of the last three fiscal years the cash
compensation paid by the Corporation, as well as certain other compensation paid
or awarded during those years, to the Chief Executive Officer and each of the
next four most highly compensated executive officers of the Corporation in all
capacities in which they served.
NAME AND ANNUAL COMPENSATION (1)
PRINCIPAL POSITION YEAR SALARY(2) BONUS (3) OTHER (4) ALL OTHER COMPENSATION (5)
------------------ ---- ----------------------------------------- --------------------------
DONALD E. SMITH 2004 $535,230 $150,000 $375,600 $ 0
President & Chairman 2003 $519,630 $150,000 $354,900 $47,325
of the Corporation; 2002 $496,764 $150,000 $353,000 $36,964
Chairman of FFB
NORMAN L. LOWERY 2004 $446,700 $150,000 $312,800 $ 4,895
Vice Chairman, CEO 2003 $429,944 $150,000 $295,500 $ 4,895
& Vice President of the 2002 $397,630 $150,000 $293,800 $ 4,895
Corporation; President
& CEO of FFB
MICHAEL A. CARTY 2004 $163,326 $ 19,000 $ 74,000 $ 1,200
CFO, Secretary & 2003 $144,935 $ 16,000 $ 69,900 $ 1,200
Treasurer of the 2002 $137,916 $ 15,500 $ 69,300 $ 1,200
Corporation; Sr. Vice
President of FFB
RICHARD O. WHITE 2004 $139,638 $ 16,000 $ 73,500 $ 1,200
Sr. Vice President 2003 $134,280 $ 16,000 $ 69,400 $ 1,200
of FFB 2002 $127,961 $ 15,000 $ 68,900 $ 1,200
THOMAS S. CLARY 2004 $150,151 $ 16,000 $ 67,900 $ 2,344
Sr. Vice President 2003 $141,215 $ 16,000 $ 64,500 $ 2,344
of FFB & CCO 2002 $ 49,691 $ 6,000 $ 27,042 $ 2,065
5
(1) While officers enjoy certain perquisites, such perquisites do not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus and are not required
to be disclosed by applicable rules of the Securities and Exchange Commission.
(2) Salary reflects base compensation and income earned in the form of
director's fees from the Corporation or its affiliate banks during the indicated
calendar years.
(3) The bonus amounts are payable pursuant to determinations made by the
Compensation Committee of the Corporation, as described in the Compensation
Committee Report and as approved by the Board of Directors.
(4) These amounts represent the amount awarded under the 2001 Long-Term
Incentive Plan. Payment of these amounts will not begin until the earlier of
January 1, 2015, or the January 1 immediately following the year in which the
participant reaches age 65. These payments generally will be annuitized over a
180-month period. Interest accrues on these amounts at 3.50% from January 1,
2010, until payment begins. When payment begins, interest will accrue on the
unpaid portion at a 7.00% annual rate compounded monthly. The plan requires
vesting over a five-year period. As such Mr. Clary, with two full years of
vesting, is entitled to receive only 40% of his awarded amount at December 31,
2004. See the discussion under "Employment Agreements" concerning payments
resulting from a "change in control," as defined in the plan.
(5) These amounts include Corporation payments for the years noted on behalf of
the above-named individuals (except Mr. Smith) pursuant to a life insurance
program (Life Insurance Program) for the executive officers of FFB. Under the
Life Insurance Program, FFB purchased a life insurance policy on behalf of
each executive officer of FFB. The policy is owned by the individual and will be
paid at age 65 for those who were 55 or older, and at age 60 for those who are
less than 55 years of age at the time the program was started. The annual cost
of this insurance for those reported (except for Mr. Smith) was as follows:
$4,895 for Mr. Lowery; $2,344 for Mr. Clary; $1,200 for Mr. Carty; and $1,200
for Mr. White. Allocations to the named individual's respective account in the
Corporation's Employee Stock Ownership Plan ("ESOP") for 2004, which are
properly included in this column, were not calculable as of the date of this
Proxy Statement. Such amounts for 2003 were as follows: $10,903 for Mr. Smith;
$10,903 for Mr. Lowery; $8,283 for Mr. Carty; and $8,193 for Mr. White.
EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN. The Corporation sponsors the First Financial
Corporation Employee Stock Ownership Plan ("ESOP") and the First Financial
Corporation Employees' Pension Plan ("Pension Plan") for the benefit of
substantially all of the employees of the Corporation and its subsidiaries.
These plans constitute a "floor offset" retirement program, so that the Pension
Plan provides each participant with a minimum benefit which is offset by the
benefit provided by the ESOP.
Under the terms of the ESOP, the Corporation or its subsidiaries, as
participating employers, may contribute Corporation common stock to the ESOP or
contribute cash to the ESOP, which will be primarily invested in the
Corporation's common stock. The amount of contributions, when they are made, is
determined by the Board of Directors of the Corporation. No participant
contributions are required or allowed under the ESOP. Participants have the
right to direct the voting of the shares of the Corporation's stock allocated to
their accounts under the ESOP on all corporate matters.
For the year ended December 31, 2004, the Corporation contributed 36,000 shares
of the Corporation's stock valued at $1,162,800 to the ESOP. The stock will be
allocated to the individual ESOP accounts of the participants effective as of
December 31, 2004, although no allocation to the individual accounts had been
made or calculated as of the date of mailing of this Proxy Statement.
DEFINED BENEFIT PLAN. The Pension Plan was adopted in conjunction with, but is
separate from, the ESOP. The monthly guaranteed minimum benefit under the
Pension Plan is reduced by the monthly benefit derived from the participant's
vested portion of his ESOP account balance, calculated by the actuary for the
Pension Plan as a single life annuity. The normal retirement benefit will
begin at age 65 and be paid monthly for as long as the participant lives.
The following table shows the estimated annual benefits payable under the
Pension Plan upon retirement at age 65 in 2004 for various periods of Benefit
Service at specified levels of remuneration. The benefit amounts presented in
the totals are annual straight life annuity amounts without deduction for Social
Security or other offset amounts and without regard for the benefit limitations
of the Internal Revenue Code. A participant's Final Average Annual Compensation
shown under the Pension Plan is generally based on the salary and bonus set
forth in the Summary Compensation Table.
----------------------------------------------------------------------------------------------------------
ESTIMATED MINIMUM ANNUAL RETIREMENT BENEFIT
----------------------------------------------------------------------------------------------------------
FINAL AVERAGE ANNUAL COMPENSATION
----------------------------------------------------------------------------------------------------------
YEARS OF
BENEFIT 300K
SERVICE 70K 100K 130K 160K 190K 220K 250K OR MORE
----------------------------------------------------------------------------------------------------------
10 $15,430 $23,380 $31,330 $ 39,280 $ 47,230 $ 55,180 $ 63,130 $ 76,380
----------------------------------------------------------------------------------------------------------
20 30,860 46,760 62,660 78,560 94,460 110,360 126,260 152,760
----------------------------------------------------------------------------------------------------------
30 39,290 60,140 80,990 101,840 122,690 143,540 164,390 199,140
----------------------------------------------------------------------------------------------------------
40 40,005 61,830 83,655 105,480 127,305 149,130 170,955 207,330
----------------------------------------------------------------------------------------------------------
6
The Corporation implemented a nonqualified supplemental retirement plan and a
nonqualified deferred compensation plan to replace benefits lost due to the
Internal Revenue Code limitations on benefits and compensation and limitations
imposed on employer contributions under the ESOP and the pension plan. These
plans are unfunded, and no contributions by the Corporation were made to these
plans during the last three fiscal years. The table does not take these limits
into account because it includes benefits from both the qualified and
nonqualified plans.
EMPLOYMENT CONTRACTS
EMPLOYMENT AGREEMENT. FFB entered into an Employment Agreement with Norman L.
Lowery, its President and Chief Executive Officer, effective January 1, 2005.
The Employment Agreement is a five-year agreement which may be extended each
year by the Board of Directors for an additional one-year term. Under the
Employment Agreement, Mr. Lowery receives an annual salary equal to his current
salary, which is $417,219 for 2005, subject to increases approved by the Board
of Directors, and is entitled to participate in other bonus and fringe benefit
plans available to the Corporation's and FFB's employees.
If Mr. Lowery is terminated for other than "just cause" or is "constructively
discharged," and such termination does not occur within 12 months after a
"change in control" (as such terms are defined in the Employment Agreement), he
would receive an amount equal to the sum of his base salary through the end of
the then-current term of the Employment Agreement. He also would be entitled to
elect to receive, at his sole discretion, either (i) cash in an amount equal to
his cost of obtaining all benefits which he would have been eligible to
participate in or receive through the term of the Employment Agreement, or (ii)
continued participation under such benefit plans through the term of the
Employment Agreement, if he continued to qualify for participation in such
benefit plans.
If Mr. Lowery is terminated for other than just cause or is constructively
discharged, and this occurs within 12 months following a change in control, he
would be entitled to an amount equal to or the greater of the compensation and
benefits described above if the termination did not occur within 12 months
following a change in control; or, the product of 2.99 times the sum of his base
salary in effect as of the date of the change in control and an amount equal to
the bonuses received by or payable to him in or for the calendar year prior to
the year in which the change in control occurs; and, at his sole discretion,
either cash in an amount equal to his cost of obtaining for a period of three
years, beginning on the date of termination, all benefits which he was eligible
to participate in or receive, or continued participation under such benefit
plans for a period of three years, beginning on the date of termination, if he
continued to qualify for participation in such benefit plans.
2001 LONG-TERM INCENTIVE PLAN. If Mr. Smith is terminated within 12 months
following a change in control, he is entitled to receive the greater of
$3,424,600 or the amount of any rewards under this plan as of December 31 of the
year prior to termination. If Mr. Lowery is terminated within 12 months
following a change in control, he is entitled to receive the greater of
$3,002,717 or the amount of any rewards under this plan as of December 31 of the
year prior to termination.
If as a result of a change in control Messrs. Smith or Lowery become entitled to
any payments from the Corporation or FFB which are determined to be payments
subject to the "golden parachute" rules of the Code, the amount due will be
increased to include payment equal to the amount of excise tax imposed under
Sections 280G and 4999 of the Code (the "Excise Tax Payment") and the amount
necessary to provide the Excise Tax Payment net of all income, payroll and
excise taxes.
TRANSACTIONS WITH MANAGEMENT
Directors and principal officers of the Corporation and their associates were
customers of, and have had transactions with, the Corporation and its subsidiary
banks in the ordinary course of business during 2004. Comparable transactions
may be expected to take place in the future.
During 2004 various directors and officers of the Corporation and their
respective associates were indebted to the subsidiary banks from time to time.
These loans were made in the ordinary course of business on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for similar transactions with other persons and did not involve more than
the normal risk of collectability or present other unfavorable features. Loans
made to directors and executive officers are in compliance with federal banking
regulations and thereby are exempt from the insider loan prohibitions included
in the Sarbanes-Oxley Act of 2002.
The law offices of B. Guille Cox, Jr., in which Mr. Cox is a partner, were paid
legal fees of approximately $65,000 by the Corporation and its subsidiaries for
the fiscal year ending December 31, 2004. In addition, during 2004, Hendrich
Abstract Co., Inc. received fees in connection with mortgage loans made by First
Financial Bank N.A., in the amount of approximately $203,000. Mr. Cox owns
one-third of Hendrich Abstract Co., Inc., and his spouse is the Vice President
of Hendrich Abstract Co., Inc.
COMPARATIVE PERFORMANCE GRAPH
The following graph compares cumulative total shareholder return on the
Corporation's common stock over the last five fiscal years with the returns of
the Russell 2000 Index, comprised of the smallest 2000 companies of the Russell
3000 Index which includes the 3000 largest market capitalization corporations
and the SNL $1B - $5B Bank Index developed by SNL Securities LC which includes
all bank stocks with total assets in this size range. The graph assumes $100.00
was invested on January 1, 1999 in the Corporation's common stock and in each of
the indices shown, and the reinvestment of all dividends.
7
FIRST FINANCIAL CORPORATION
TOTAL RETURN PERFORMANCE
PERIOD ENDING
INDEX 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
---------------------------------------------------------------------------------------------------------------
First Financial Corporation $100.00 $ 79.70 $112.51 $128.10 $161.96 $193.73
Russell 2000 100.00 96.98 99.39 79.03 116.38 137.71
SNL $1B-$5B Bank Index 100.00 113.48 137.88 159.16 216.44 267.12
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board of Directors,
attached hereto as Exhibit A, the Audit Committee of the Board ("Committee")
assisted the Board in fulfilling its responsibility for oversight of the quality
and integrity of the accounting, auditing and financial reporting practices of
the Corporation. All of the members of the Committee are independent, as defined
in the Corporation's listing requirements, from management and the Corporation.
During the current year, the Committee met four times, and the Committee
chair, as representative of the Committee, discussed the interim financial
information contained in each quarterly earnings announcement with the CFO,
controller and independent auditors prior to public release.
In discharging its oversight responsibility as to the audit process, the
Committee obtained from the independent auditors a formal written statement
describing all relationships between the auditors and the Corporation that might
bear on the auditors' independence consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed
with the auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the auditors' independence. The
Committee also discussed with management, the internal auditors and the
independent auditors the quality and adequacy of the Corporation's internal
controls and the internal audit functions organization, responsibilities, budget
and staffing. The Committee reviewed both with the independent and internal
auditors their audit plans, audit scope and identification of audit risks.
The Committee discussed and reviewed with the independent auditors all
communications required by generally accepted auditing standards, including
those described in Statement on Auditing Standards No. 61, as amended,
"Communication with Audit Committees," and, with and without management present,
discussed and reviewed the results of the independent auditors' examination of
the financial statements. The Committee also discussed the results of the
internal audit examinations.
The Committee reviewed and discussed the audited financial statements of the
Corporation as of and for the year ended December 31, 2004, with management and
the independent auditors. Management has the responsibility for the preparation
of the Corporation's financial statements and the independent auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussions with management and the
independent auditors, the Committee recommended to the Board that the
Corporation's audited financial statements be included in its Annual Report on
Form 10-K for the year ended December 31, 2004, for filing with the Securities
and Exchange Commission. The Committee also recommended the reappointment of the
independent auditors.
Anton H. George, Audit Committee Chairman
Patrick O'Leary Thomas T. Dinkel
AUDIT FEES
FEES PAID TO CROWE CHIZEK AND COMPANY LLC
The following table sets forth the aggregate fees billed by Crowe Chizek and
Company LLC ("Crowe Chizek") for audit services rendered in connection with the
consolidated financial statements and reports for fiscal year 2004 and fiscal
year 2003 and for other services rendered during fiscal year 2004 and fiscal
year 2003 on behalf of the Corporation and its subsidiaries, as well as all
out-of-pocket costs incurred in connection with these services, which have been
billed to the Corporation:
FISCAL 2004 FISCAL 2003
----------- -----------
Audit Fees $300,000 $135,675
Audit Related Fees 3,950 3,750
Tax Fees 60,075 34,570
All Other Fees 202,820 58,371
-------- --------
Total $566,845 $232,366
8
AUDIT FEES: Consists of fees billed for professional services rendered for
(i) the audit of the Corporation's consolidated financial statements, (ii) the
review of the interim condensed consolidated financial statements included in
quarterly reports, (iii) the services that are normally provided by Crowe Chizek
in connection with statutory and regulatory filings or engagements, and (iv)
the attest services, except those not required by statute or regulation.
AUDIT-RELATED FEES: Consists of fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Corporation's consolidated financial statements and are not reported
under "Audit Fees." These services include the review of management's
attestation and performance of agreed upon procedures for student loan servicing
for both 2004 and 2003.
TAX FEES: Consists of tax compliance/preparation and other tax services.
Tax compliance/preparation consists of fees billed for professional services
related to federal and state tax compliance, assistance with tax audits and
appeals and assistance related to the impact of mergers, acquisitions and
divestitures on tax return preparation. Other tax services consist of fees
billed for other miscellaneous tax consulting and planning and for individual
income tax preparation.
ALL OTHER FEES: All other fees include consulting and testing regarding the
network, internet and information systems controls for both 2004 and 2003.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
All of the fees and services described above under "audit fees," "audit-related
fees," "tax fees" and "all other fees" were pre-approved by the Audit Committee.
The Audit Committee pre-approves all audit and permissible non-audit services
provided by the independent auditors. These services may include audit services,
audit-related services, tax services and other services. The Audit Committee has
adopted a policy for the pre-approval of services provided by the independent
auditors. Under the policy, pre-approval is generally provided for up to one
year and any pre-approval is detailed as to the particular service or category
of services and is subject to a specific budget. In addition, the Audit
Committee may also pre-approve particular services on a case-by-case basis. For
each proposed service, the independent auditor is required to provide detailed
back-up documentation at the time of approval. The Audit Committee may delegate
pre-approval authority to one or more of its members. Such a member must report
any decisions to the Audit Committee at the next scheduled meeting.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table contains information concerning individuals or entities who,
to the knowledge of the Corporation, beneficially owned on March 15, 2005,
more than 5% of the common stock of the Corporation:
---------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
---------------------------------------------------------------------------------------------
First Financial Corporation 866,349(1) 6.41%
Employee Stock Ownership Plan ("ESOP")
One First Financial Plaza
Terre Haute, Indiana 47807
---------------------------------------------------------------------------------------------
T. Rigasco Trust Co-Trustees: 960,458 7.11%
National City Bank of Indiana
One National City Center
Indianapolis, Indiana 46255
Jack R. Snyder
One American Square
Indianapolis, Indiana 46282
---------------------------------------------------------------------------------------------
Princeton Mining Company 1,314,714 9.73%
State Road 46 South
Terre Haute, Indiana 47803
---------------------------------------------------------------------------------------------
(1) Represents shares held in Trust by the Corporation's subsidiary, First
Financial Bank N.A.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Corporation's directors and executive officers, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of Corporation common stock and other equity
securities of the Corporation. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file. To the best knowledge of the
Corporation, during the most recent fiscal year all officers, directors and
greater than ten percent beneficial owners of the Corporation timely filed all
statements of beneficial ownership required to be filed with the SEC.
9
INDEPENDENT AUDITORS
The Audit Committee appointed Crowe Chizek and Company LLC, as independent
accountants to audit the books, records and accounts of the Corporation for 2004
and 2003. The Audit Committee anticipates that it will appoint an independent
public accountant to audit the books, records, and accounts of the Corporation
for 2005 in April, 2005. Representatives of Crowe Chizek are expected to be in
attendance at the annual meeting and will be provided an opportunity to make a
statement should they desire to do so and to respond to appropriate inquiries
from the shareholders.
SHAREHOLDER COMMUNICATION WITH THE BOARD OF DIRECTORS
Any shareholder who desires to contact the Chairman of the Board of Directors or
the other members of the Board of Directors, or who desires to make a
recommendation of a director candidate for consideration by the
Governance/Nominating Committee, may do so electronically by sending an email to
the following address: directors@ffc-in.com. Alternatively, a shareholder can
contact the Chairman of the Board or the other members of the Board by writing
to: Chairman, First Financial Corporation, P.O. Box 540, Terre Haute, IN 47808.
Communications received electronically or in writing are distributed to the
Chairman of the Board or the other members of the Board as appropriate depending
on the facts and circumstances outlined in the communication received. For
example, if any complaints regarding accounting, internal accounting controls
and auditing matters are received, then they will be forwarded by the
Secretary to the Chairman of the Audit Committee for review.
SHAREHOLDERS PROPOSALS
Any proposals which shareholders desire to present at the 2006 Annual Meeting
must be received by the Corporation at its principal executive offices on or
before November 22, 2005 to be considered for inclusion in the Corporation's
proxy material for that meeting. The proxy rules of the Securities and Exchange
Commission govern the content and form of stockholder proposals and the minimum
stock holding requirement. All proposals must be a proper subject for action at
the 2006 Annual Meeting. In addition, any proposal submitted for consideration
at the 2006 Annual Meeting but not for inclusion in the Corporation's proxy
material for that meeting must be received no later than February 26, 2006 or
such proposal will be considered untimely.
If notice of any other shareholder proposal intended to be presented at the 2006
Annual Meeting is not received by the Corporation on or before February 6,
2006, the proxies will have discretionary authority to vote on the matter. All
proposals and notifications should be addressed to the Secretary of the
Corporation.
ANNUAL REPORT TO SHAREHOLDERS
The 2004 Annual Report to Shareholders, containing financial statements for the
year ended December 31, 2004, and other information concerning the operations of
the Corporation is enclosed herewith, but is not to be regarded as proxy
soliciting material.
UPON WRITTEN REQUEST, THE CORPORATION WILL PROVIDE WITHOUT CHARGE TO EACH
REQUESTING SHAREHOLDER, A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K,
WHICH IS REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR
THE YEAR ENDED DECEMBER 31, 2003. ADDRESS ALL REQUESTS TO:
MICHAEL A. CARTY, SECRETARY & TREASURER
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA o P.O. BOX 540 o TERRE HAUTE, INDIANA 47808
OTHER MATTERS
The Annual Meeting is called for the purposes set forth in the Notice. The Board
of Directors of the Corporation does not know of any matters for action by
shareholders at such Annual Meeting other than the matters described in the
notice. However, the enclosed Proxy will confer discretionary authority with
respect to matters which were not known to the Board of Directors at the time of
the printing hereof and which may properly come before the Annual Meeting. It is
the intention of the persons named in the Proxy to vote pursuant to the Proxy
with respect to such matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ DONALD E. SMITH
DONALD E. SMITH
Chairman of the Board and President
10
Exhibit A
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
FIRST FINANCIAL CORPORATION
PURPOSE The Audit Committee (the Committee) is appointed by the Board of
Directors (the Board) to assist the Board in fulfilling its oversight
responsibilities with respect to monitoring (1) the integrity of the financial
statements of First Financial Corporation (the Corporation), (2) the independent
auditor's qualifications and independence, (3) the performance of the
Corporation's internal audit function and independent auditors, and (4)the
compliance by the Corporation with legal and regulatory requirements.
The Committee shall prepare the report required by the rules of the Securities
and Exchange Commission (the Commission) to be included in the Company's annual
proxy statement.
COMMITTEE MEMBERSHIP The Committee shall consist of no fewer than three members.
The members of the Committee shall meet the independence and experience
requirements of NASDAQ STOCK MARKET, INC., Section 10A (m)(3) of the Securities
Exchange Act of 1934 (the Exchange Act) and the rules and regulations of the
Commission. As required by the Commission, if a member of the Committee meets
the definition of a financial expert, as defined by the Commission, that member
shall be so designated. The members of the Committee shall be appointed by the
Board.
MEETINGS The Committee will meet at least quarterly but reserves the right to
meet as often as it shall determine. The Committee shall meet periodically with
management, the internal auditors and the independent auditor in separate
executive sessions. The Committee shall have the authority to retain special
legal, accounting or other consultants to advise the Corporation. The Committee
may request any officer or employee of the Corporation or the Corporation's
outside counsel or independent auditors to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Corporation. The Committee
shall periodically make reports to the Board.
COMMITTEE AUTHORITY AND RESPONSIBILITIES The Committee shall have sole authority
to appoint or replace the independent auditor. The Committee shall be directly
responsible for the compensation and oversight of the work of the independent
auditor (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of preparing
or issuing an audit report or related work. The independent auditor shall report
directly to the Committee. The Committee shall preapprove all auditing services
and permitted non-audit services to be performed for the Corporation by its
independent auditor.
The Committee shall also approve fees for services as outlined in engagement
letters or quoted by the independent auditors. Fees for routine preapproved
services will be reported to the Committee as invoiced. The Committee may form
and delegate authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant preapprovals of audit and
permitted non-audit services, provided that decisions of such subcommittees to
grant preapprovals shall be presented to the full Committee at its next
scheduled meeting.
FINANCIAL STATEMENT AND DISCLOSURE MATTERS The Committee, to the extent it
considers necessary, shall:
1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.
2. Review and discuss the annual audited financial statements with management
and the independent auditor, including disclosures made imanagement's discussion
and analysis, accounting and auditing principles and practices, and the adequacy
of internal controls that could significantly affect the Corporation's financial
statements, and recommend inclusion of the financial statements in the 10-K to
the Board.
3. Review with management and the independent auditor the Company's financial
results prior to the filing of Form 10-Q and review results of the SAS 100
review of the quarterly financial statements included in Form 10-Q. Such review
will include:
(a) all critical accounting policies and practices to be used.
(b) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditor.
(c) other material written communications between the independent auditor
and management, such as any management letter or schedule of unadjusted
differences.
4. Discuss with management the Corporation's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies.
5. Review with management and the independent auditor the effect of regulatory
and accounting initiatives as well as off-balance sheet structures on the
Corporation's financial statements.
OVERSIGHT OF THE CORPORATION'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
6. Report annually to the Board the appointment of the independent auditor and
monitor the fees, duties and independence concerns.
7. Approve in advance all audit services to be provided by the independent
auditor, including any written engagement letters related thereto. (By approving
the audit engagement, the audit service contemplated in any written engagement
letter shall be deemed to have been pre-approved.)
8. Establish policies and procedures for the engagement of the independent
auditor to provide permissible non-audit services, which shall require
pre-approval by the Audit Committee of all permissible non-audit services to be
provided by the independent auditor. All engagements pertaining to internal
control consulting require approval of the specific engagement.
9. Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the independent
auditor.
10. Approve the retention of the independent auditor for any non-audit service
and the fee for such service.
11. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if necessary,
recommend that the Board take appropriate action to satisfy itself of the
independence of the auditor.
12. Evaluate together with the Board the performance of the independent auditor
and if the performance is considered to be unsatisfactory, recommend that the
Board replace the independent auditor.
13. Discuss with the independent auditor the matters required to be discussed by
Statement on Auditing Standards No. 61 or other standards that may in time
modify, supplement or replace SAS 61 relating to the conduct of the audit.
(a) On an annual basis, the Committee shall ensure receipt of, and review
with the independent auditor, the written statement required by
Independence Standards Board (ISB) Standard No. 1, as may be modified,
supplemented or replaced, and discuss with the auditors their independence.
14. Review with the independent auditor any significant difficulties the auditor
may have encountered in conducting the audit or working with management and any
management letter provided by the auditor and the Corporation's response to that
letter. Such review should include:
(a) any significant difficulties encountered in the course of the audit
work, including any restrictions on the scope of activities or access to
required information, and any disagreements with management.
(b) any changes required in the planned scope of the audit.
(c) any significant concerns about the internal audit department's
responsibilities, budgeting and staffing.
15. Ensure the rotation of the lead audit partner having primary responsibility
for the audit and the audit partner responsible for reviewing the audit as
required by law.
16. Obtain and review a report from the independent auditor periodically
regarding
(a) the independent auditor's internal quality control procedures,
(b) any material issues raised by the most recent quality control review or
peer review of the firm.
OVERSIGHT OF THE CORPORATION'S INTERNAL AUDIT FUNCTION
17. Review the appointment, performance and replacement of the senior internal
auditing executive.
18. Review the reports to management prepared by the internal auditing
department and management's responses.
19. Review and approve the annual internal audit plan.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
20. Establish procedures for the receipt, retention and treatment of complaints
received by the Corporation regarding accounting, internal accounting controls
or auditing matters, and the confidential, anonymous submission by employees of
concerns regarding questionable accounting or auditing matters.
21. Discuss with management and the independent auditor any correspondence with
regulators or governmental agencies and any published reports which raise
material issues regarding the Corporation's financial statements or accounting
policies.
22. Discuss with the independent auditor any illegal act(s) identified during
the conduct of the audit, if applicable and any conclusions reached regarding
such matter(s).
23. Ascertain that there have been no violations of the Corporation's Code of
Business Conduct and Ethics, which shall include a review of insider and related
party transactions.
24. Periodically review and discuss the adequacy and effectiveness of the
Corporation's internal and disclosure controls and procedures related to
financial reporting and management and independent auditor reports thereon.
25. Ensure the Corporation adheres to regulatory guidelines regarding the hiring
of employees and former employees of the independent auditor.
26. The Committee shall approve all transactions with related parties, including
loans and extensions of credit, fees and commissions for services, purchases or
sales of assets and any other financial arrangements. For purposes of this
responsibility, the definition of related parties will follow the definition of
insider loans, as provided in Regulation O.
LIMITATION OF EXAMINING COMMITTEE'S ROLE While the committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Corporation's
financial statements and disclosures are complete and accurate and are in
accordance with generally accepted accounting principles and applicable rules
and regulations. These are the responsibilities of management and the
independent auditor.
11
FIRST FINANCIAL CORPORATION
ONE FIRST FINANCIAL PLAZA
P.O. BOX 540
TERRE HAUTE, INDIANA 47808
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James E. Brown and Ronald K. Rich, or
either of them as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all shares
of common stock of First Financial Corporation which the under-signed is
entitled to vote at the Annual Meeting of Shareholders to be held at One First
Financial Plaza, Terre Haute, Indiana on Wednesday, April 20, 2005, at 11:00
a.m. (local time), or any adjournment thereof, on the following matters:
1. Election of Directors
A. [ ] For all nominees listed below for a three-year term to expire in
2008 (except as marked to the contrary below):
B. Guille Cox, Jr., Anton H. George, Gregory L. Gibson and
Virginia L. Smith
[ ] WITHHOLD AUTHORITY to vote for all nominees listed above.
B. [ ] For the nominee listed below for a two-year term to expire in 2007
(except as marked to the contrary below):
W. Curtis Brighton
[ ] WITHHOLD AUTHORITY to vote for the nominee listed above.
(INSTRUCTIONS: To withhold authority to vote for any individual, strike a
line through the nominee's name in the list above.)
2. In their discretion, on such matters as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED FOR ALL THE NOMINEES LISTED ABOVE.
Please sign exactly as name appears below. If there are two or more
owners, both must sign. When signing as attorney, executor, 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.
Dated: , 2005
------------------------ --------------------------------------
(Signature)
--------------------------------------
(Signature, if held jointly)
Your vote is important. Please mark,
sign and date and return this Proxy
promptly, using the enclosed envelope.